VoxEU & CEPR Coverage of the Covid-19 Global Pandemic

Tracking compliance with EU fiscal rules

Martin Larch, Stefano Santacroce, 24 September 2020

The urgent need to respond to the unprecedented economic shock resulting from the Covid-19 pandemic has relegated the review of EU fiscal rules to the background. However, the question of whether and how to review the Stability and Growth Pact will soon re-emerge as a key topic in the policy debate, not least in light of the very sharp increase in government debt levels. This column presents a new database from the Secretariat of the European Fiscal Board that tracks numerical compliance with the SGP. It offers valuable insights into which rules worked or not for which group of countries and under what circumstances. The database is available to the research community and can inform any future attempt to improve the current fiscal framework of the EU.

A tale of three depressions

Paul De Grauwe, Yuemei Ji, 24 September 2020

The coronavirus pandemic caused a catastrophic collapse in the world economy. This column analyses the path of this decline and compares it to two other major global crises: the Great Depression in the 1930s and the Great Recession following the banking crisis of 2007-2008. It argues that COVID-19 led to both negative demand and supply shocks, resulting in a contraction of industrial production at an unprecedented pace. However, a combination of strong government policies and a functioning banking sector have led to a swifter rebound in economic activity following the coronavirus shock in comparison with the previous two crises.

Sovereign risk after Covid-19

Wojtek Paczos, Kirill Shakhnov, 24 September 2020

The sharp reductions in economic output and large-scale government expenditures prompted by the Covid-19 pandemic have led to an enhanced risk of sovereign defaults, especially in emerging economies. This column argues that an output drop alone increases the risk of foreign default, while a sudden expenditure hike alone increases the risk of domestic default. Thus, given the double nature of the Covid shock, recent proposals that would ease the burden of foreign debt after COVID-19 in emerging economies are necessary but may not be sufficient to prevent a wave of defaults on domestic debt.

Cross-border venture capital, technology flows, and national security

Ufuk Akcigit, Sina T. Ates, Josh Lerner, Richard Townsend, Yulia Zhestkova, 24 September 2020

The US military community has highlighted the potential security threat posed by foreign venture investments in Silicon Valley, particularly from Chinese stakeholders. This column presents a theoretical and empirical analysis of the relationship between venture capital and national security, focusing on the ability of overseas firms to gain a domestic technological advantage through investing in the US tech sector. The growing importance of this the technology sector, as well as the national security issues at stake, mean that understanding the correlations is a vital avenue of future research.

How Americans use time saved by working from home

Jose Maria Barrero, Nicholas Bloom, Steven Davis, 23 September 2020

The COVID-19 pandemic triggered a sudden, massive shift around the world to working from home. While there is great concern how this will affect inequality and how the economy will adjust, the shift has also saved billions of hours of commuting time in the US alone. Drawing on original surveys, this column estimates that the shift to working from home lowers commuting time among Americans by more than 60 million hours per workday. Americans devote about a third of the time savings to their primary jobs and about 60% to other work activities, including household chores and childcare. The allocation of time savings differs substantially by education group and between persons with and without children at home.

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