May 2020

Aksoy, Eichengreen, Saka, 31 May 2020

It is argued that COVID-19 will reverse the ongoing trend of challenging the value of science and the integrity of scientists. This column shows that exposure to epidemics in one’s country of residence during the ‘impressionable years’ of ages 18 to 25 has no impact on confidence in science as an enterprise, but negatively affects views of the honesty and public-spiritedness of scientists.

Dolton, 31 May 2020

The COVID-19 pandemic is causing serious financial problems for UK universities. This column identifies the over-reliance on Chinese students for fee income as the main cause of the impact and considers what steps the government might take to support universities through this crisis.

Furman, 31 May 2020

The public health measures to ‘flatten the Covid-19 curve' will necessarily and appropriately impose large economic costs. This column, taken from a VoxEU eBook, identifies the constraints that policy faces during a pandemic – uncertainty, time, and capacity – and the implications of these constraints.

Fuchs-Schündeln, Kuhn, Tertilt, 30 May 2020

The COVID-19 crisis has hit women’s employment particularly hard, partly because the worst-hit sectors have high female employment shares, but also because schools and daycare closures have forced more mothers to leave their jobs. This column looks at Germany, where 26% of the workforce has children aged 14 or younger, and quantifies the macroeconomic importance of working parents. If schools and daycare centres remain closed as the economy slowly reopens, 11% of workers and 8% of all working hours will be lost to the labour market. Policies to restart the economy must accommodate the concerns of these families.

Ari, Chen, Ratnovski, 30 May 2020

Non-performing loans are a crucial policy consideration, especially in times of wider economic crisis. This article uses a new database covering 88 banking crises since 1990 to draw lessons for post-COVID-19 resolution of non-performing loans.  Compared to the 2008 crisis, the pandemic poses some different challenges. Despite some respite from the credit-crash of 2008, policymakers today are faced with substantially higher public debt, less profitable banks, and often weaker corporate sector conditions, making resolution of non-performing loans even more challenging.

Gandré, Mariathasan, Merrouche, Ongena, 30 May 2020

Managing global financial risks requires coordinated policies and a firm commitment by national actors. In the absence of such commitment, risks are reallocated and concentrate where they are least effectively addressed. Using data on the staggered implementation of the G20’s global derivatives market reform, this column documents US banks’ response to reform progress. It finds that banks shift trading activities towards less regulated jurisdictions and adopt riskier portfolios overall. The effects are driven by agenda items – like the promotion of central clearing – that are costly and do not benefit banks directly.

Gadenne, Ghatak, 30 May 2020

As debates about the future of the World Health Organization rage on, the Covid-19 pandemic is a reminder of the vital importance of global public health institutions. This column considers what principles should guide WHO’s missions and tools to deal with pandemics, which are distinguished from other health risks by their high contagion, extreme potential outcomes in terms of mortality risk, and the ‘weak-link’ aspect of global collective action. It argues that reforms should centre around having a narrower mission – Global Response to Infectious Diseases, or GRID – and creating better incentives to prevent contagions from spreading globally using stronger legal and financial tools. 

Baldwin, 29 May 2020

Has Covid accelerated the future of work? This column argues that Covid has changed the future of work via four shocks: massive job losses, massive digital transformations, massive debt burdens, and massive costs of socially distanced office space. These matter in two ways. First, due to sunk cost hysteresis, re-hiring workers is very different than retaining workers. Second, the digital transformations, office-space costs, and debt burdens will push firms to replace domestic workers with ‘telemigrants’ or ‘white-collar robots’. The jobs that return will be those that require face-to-face interactions and involve tasks that AI cannot handle. 

Sussman, 29 May 2020

The mortality statistics of the Covid-19 outbreak suggest that your country's medical infrastructure has a big influence on how likely you are to survive. Nathan Sussman has examined the data and tells Tim Phillips why all countries should be urgently investing in their health services.
Read "Time for Beds" in issue 11 of Covid Economics.

Argente, Baslandze, Hanley, Moreira, 28 May 2020

Patents are at the heart of policies designed to incentivise innovation and productivity growth. In recent years however, while patent activity has skyrocketed, innovation and productivity growth have not. This column collects data on product innovations and links those to their respective patent. While patent filings are found to be followed by product innovations overall, this relationship is much stronger for firms with lower market share.

de Melo, Tandrayen-Ragoobur , Seetanah, 28 May 2020

When they are strict and prolonged, the public health and social measures to contain Covid-19 have proven difficult to respect. This column gives evidence of the different outcomes, as of 23 May, across a sample of 20 tourist-dependent island states with populations of between 100,000 and 10 million. If tourist-dependent islands have been hit hard by the shock, most have fared well, particularly those – like Mauritius – that acted early and imposed a strict lockdown. 

Markowitz, Nesson, Robinson, 28 May 2020

High levels of economic activity can foster the spread of communicable diseases through frequent person-to-person interactions.  This column discusses how research on high levels of employment affects the spread of influenza and other viruses transmitted via droplet-spread, such as SARS-CoV-2.   The results show that the high levels of employment in the US encourages the spread of influenza, especially when employment in service sectors are high.  Our results provide support for social distancing measures aimed to slow the growth of cases of COVID-19.

Bolton, Buchheit , Gourinchas, Gulati, Hsieh, Panizza, Weder di Mauro, 28 May 2020

The official sector has moved swiftly to assist the poorer countries most affected by the Covid-19 pandemic, under the banner of the Debt Service Suspension Initiative.  Will private sector creditors follow suit? The G20 "called upon" commercial creditors to provide comparable forbearance but did not mandate it. In response, the private sector has offered an impressive list of the reasons why a temporary deferral of payments to commercial creditors will be time-consuming, expensive and possibly very damaging to the debtor countries requesting it. This column discusses the challenges in attempting to coordinate wholly voluntary private sector debt relief for sovereigns afflicted by the pandemic.

Papaioannou, Stantcheva, 27 May 2020

To the world, Alberto Alesina was an engaged, prolific economist improving the policy debate. To the economics profession, he was a giant and driving force in the field of political economy. To the authors of this column, he was a brilliant, warm and funny close co-author and friend. 

Bounie, Camara, Galbraith, 26 May 2020

Identifying the effect of COVID-19 pandemic on individuals and economies is a challenging task, as official economic data have, as they inevitably do, lagged events. Using billions of anonymised French bank card transactions from before and during the COVID-19 epidemic, this column examines changes in consumer mobility, anticipatory behaviour in response to announced restrictions, and the contrasts between the responses of online and traditional point-of-sale consumption expenditures to the shock. Based on responses tracked at hourly, daily, and weekly frequencies, it finds that consumers' use of the online shopping option has mitigated the overall impact of the shock.

Bénassy-Quéré, Weder di Mauro, 26 May 2020

After a period of hesitation, governments in Europe have reacted forcefully to the Covid-19 pandemic with various strategies combining social distancing, testing/quarantining, and lockdowns. During a pandemic, however, coordination is key and repairing corporate balance sheet and the single market, as well as economic recovery constitute common goods. This column takes stock of the progress on addressing the crisis on the three axes of European-level support – monetary, banking and fiscal policy. The EU Recovery plan that is taking shape looks promising and could represent a significant sign of European solidarity and unity. 

Voth, 26 May 2020

The Covid crisis has prompted the question of how much mobility a globalised world can and should have. This column, taken from a VoxEU eBook, breaks the question down into two elements: Is a massive restriction of mobility desirable? And is it feasible at all? The free exchange of goods and capital does not have to be restricted; only very few diseases are transmitted by contaminated goods. On the other hand, while the free movement of people also contributes to the advantages of globalisation, it is far less important for production. Severe restrictions may well be desirable and justifiable, bringing to an end a half-century of ever-increasing individual mobility.

Angeloni, 26 May 2020

In 2012, at the peak of the euro crisis, the leaders of the EU launched the banking union, involving the transfer of large parts of the banking regulatory and supervisory framework from the national domain to the euro area. This column introduces a new report which takes stock of this reform so far and proposes policy measures to improve its performance. It identifies three strategic goals for regulatory and supervisory action aimed at reviving the banking union: reduce overbanking among weaker players; favour consolidation and enhance efficiency among the stronger ones; strengthen balance sheets further, while encouraging area-wide diversification. The proposed measures cover, among other areas, the crisis management mechanism, with a revamp of the instruments and functions of the Single Resolution Board; banking supervision, to enhance the ECB’s action in the micro and macroprudential fields; and the state-aid controls in the banking sector.

Giavazzi, Tabellini, Weder di Mauro, 26 May 2020

Alberto Alesina was one of the foundational pillars of political economics over many decades, and one of the most creative economists of his time. In this column, three friends of Alberto pay tribute to a man who was driven by a relentless curiosity and was a mentor and source of inspiration for innumerable students and colleagues.

Bonadio, Huo, Levchenko, Pandalai-Nayar, 25 May 2020

Lockdown disruptions to manufacturing and shipping transmit shocks across countries through global supply chains. This column uses a simulation analysis to quantify these impacts and finds that the transmission of foreign lockdowns accounted for one-third of the total Covid-19-related GDP contractions. However, renationalisation of global supply chains is unlikely to help insulate economies from future pandemic-driven lockdowns. The reason is that eliminating reliance on foreign inputs would increase the reliance on domestic inputs. Since a pandemic-related lockdown would also affect domestic input suppliers, there is generally no resilience benefit from renationalising international supply chains.

Midões, 25 May 2020

The COVID-19 lockdown and ensuing crisis have forced many individuals to stop working or to substantially reduce their working hours. This column examines how many Europeans can afford basic necessities for two months without a privately earned income. The findings indicate that nearly 100 million people in 21 EU countries do not have enough savings for two months of food, utilities, and rent or mortgage. Those born outside of the EU are especially vulnerable. Targeted government support is essential; rent and mortgage suspension can be effective tools.

Espitia, Rocha, Ruta, 24 May 2020

Although initial conditions in global food markets in the face of COVID-19 pandemic are good, disruptions across countries most affected could reduce global supplies of key staples. This column shows that escalating export restrictions would multiply the initial shock by a factor of three, with world food prices rising by up to 18% on average. Import food dependent countries, which are in large majority developing and least developed countries, would be most affected. Uncooperative trade policies could risk turning a health crisis into a food crisis.

Lantis, Nesson, 23 May 2020

The idea that basketball players can find themselves with a ‘hot hand’ – a streak in which they seem magically to make shot after shot – resonates with sports reporters and spectators alike. This column investigates whether the idea of the ‘hot hand’ holds any basis in fact. Analysing 12 seasons of data from the National Basketball Association, including over 500,0000 free throws and two million field goals, the authors conclude that the basketball ‘hot hand’ is largely illusory.   

Chwieroth, Walter, 23 May 2020

Although necessary, many of the economic policy responses to the COVID-19 crisis may end up damaging political incumbents in the medium and long term. This column presents evidence suggesting that voters expect great things from their leaders in deep crises. Yet the potential for great disappointment arises from the inevitable perceived inequities that will follow from the coronavirus crisis bailouts. As the pandemic exacerbates existing divisions within societies, the political costs predicted implies that only a minority of the most skilled political leaders are likely to survive this crisis.

Demmou, Franco, Calligaris, Dlugosch, 23 May 2020

There is widespread concern that the COVID-19 induced liquidity shortages may cause firm bankruptcies on a large scale. This column examines the financial vulnerability of firms associated with confinement measures, and discusses the immediate steps that governments can take to reduce the risks of such crisis. Without policy actions, around 30% of European firms would face liquidity shortages after two months of confinement measures. A decisive public intervention, and especially the support to wage payments, is found to be crucial in order to avoid the temporary shock implied by the COVID-19 crisis permanently scarring the corporate landscape.

Eymeoud, Vertier, 22 May 2020

While decades of research have investigated the reasons behind the underrepresentation of women in politics, uncovering discriminatory behaviours of voters remains a difficult task. This column examines the voting outcomes of French departmental elections in 2015, which required candidates to run in mixed-gender pairs, and isolates discriminatory behaviour of right-wing voters. Right-wing parties lost votes when the woman’s name appeared first on the ballot. However, the discriminatory effect disappears where information about the candidates is available on the ballot.

Kauko, 22 May 2020

Many observers have had a sceptical attitude towards Chinese banks’ official disclosures of non-performing loans. A loan should be classified non-performing if the customer stops servicing the loan. Therefore, hidden problems in the loan portfolio would manifest themselves as a suspiciously low interest revenue. Using this simple idea, this column sheds light on the likely distribution of hidden non-performing loans in Chinese banks. It finds that loan quality problems became more commonplace in 2016. Surprisingly, hidden NPLs seem more common in strongly capitalised banks and large banks, but also in banks that rely on interbank funding.

Cecchetti, Schoenholtz, 22 May 2020

Despite significant reforms over the last two decades, the euro area remains divided, both politically and financially. This column reviews the progress towards the completion of the European monetary union and highlights the remaining gaps. The euro area remains behind the US in terms of risk sharing, banking and capital markets union, and labour mobility. In addition, there is no common fiscal policy to provide support in response to regional shocks. The COVID-19 crisis is a severe test for the euro area, which should be met with renewed calls for solidarity and integration.

Baldwin, Freeman, 22 May 2020

International trade has helped many nations get vital medical supplies during this pandemic, yet a number of new, protectionist initiatives have been taken or discussed which could disrupt global value chains. This column presents calculations showing that national manufacturing sectors all across the globe are highly interdependent, that these connections have risen since the 2008/9 crisis, and that China is pivotal in the network of dependencies. Given this, policies that seek to hinder supply-chain trade could prove costly. 

Santos-Pinto, Mata, 22 May 2020

Increasing and recurring pleas to return to normality in order to avoid the economic costs of a lockdown rely on the idea that ‘natural’ herd immunity may be achieved by letting Covid-19 spread without measures to contain it. This column discusses key uncertainties associated with Covid-19 and argues that there are substantial benefits in keeping the lockdown in place in order to first learn more about Covid-19 and then decide on the best strategy. This logic is based on option theory which shows that when a strategy has irreversible consequences and there are important uncertainties, there is substantial value in waiting.

Bénassy-Quéré, Weder di Mauro, 22 May 2020

After a period of hesitation, governments in Europe have reacted forcefully to the Covid-19 pandemic with various strategies combining social distancing, testing/quarantining, and lockdowns. During a pandemic, however, coordination is key, and in responding to the current crisis European coordination has proved as painful as ever. A new eBook brings together Vox columns analysing the three axes of European-level support – monetary policy and banking, state aid and fiscal rules, and funding – and identifies the main difficulties that will appear down the road. It concludes that the EU Recovery plan that is taking shape looks promising and could represent a significant sign of European solidarity and unity.

Cabral, 22 May 2020

Should competition authorities intervene more often in tech mergers? Be careful, Luis Cabral tells Tim Phillips: they risk stifling innovation if they do. 

Rickne, Folke, 21 May 2020

The #MeToo movement put a spotlight on a severe and highly prevalent workplace problem: sexual harassment. Using data from Sweden, this column argues that economists should treat sexual harassment as gender discrimination in work conditions. Both men and women are subject to this discrimination when they are part of gender minorities in occupations or workplaces.

Situation Room, 21 May 2020

Effective management of the COVID-19 crisis requires real data in real time, often drawn from multiple sources. This column describes how researchers in Finland have created a remote-access ‘Situation Room’ that allows for real-time analysis of the Finnish economy, both for the government and for the wider public. The results from the study provide useful insights for policymakers in Finland and beyond.

Henry, Zhuravskaya, Guriev, 21 May 2020

The most recent manifestations of populism owe a portion of their rise to social media and the unfettered spread of false and misleading narratives or, as they are sometimes called, ‘alternative facts’. This column makes use of an online experiment conducted among Facebook users in France during the 2019 European Parliament elections to show that fact-checking can staunch the flow of false information, as can the imposition of small costs such as requiring an additional click to confirm a user’s willingness to share news.

García-Herrero, Ribakova, 21 May 2020

The spread of COVID-19 and its associated impacts have again brought into focus the dependence of emerging market economies on external financing. This column analyses the factors that put emerging economies at an increased risk of a sudden reduction in dollar liquidity as a consequence of the COVID-19 outbreak. Based on this analysis, it reviews the key tools at the disposal of emerging economies, the Fed, and the IMF to address this problem. It concludes by offering some policy recommendations on the pecking order that could be followed to potentially shield the emerging economies from the dollar shortage problems related to COVID-19.

Jinjarak, Ahmed, Nair-Desai, Xin, Aizenman, 20 May 2020

Remobilising workers without risking a COVID-19-related medical overload will require effective modelling to guide public policy. Applying multiple techniques, this column studies the factors engendering the empirical shape of mortality curves from the onset of the pandemic to local peaks, with a focus on how policy intensity interacted with structural variables. Accounting for global diffusion patterns, it finds that more stringent policies were associated with significantly lower mortality growth rates, which took longer to peak in countries considered more democratically free and those further from the equator. 

Bloom, Bunn, Chen, Mizen, Thwaites, Smietanka, 20 May 2020

The spread of Covid‑19 and the measures to contain it are having a significant impact on many countries around the world. This column presents results from a survey of CFOs conducted in mid-April 2020, which show that businesses in the UK expected the spread of Covid-19 to reduce sales by just over 40%, relative to what would have otherwise happened. Large impacts on employment and investment were also expected. The impacts were expected to be concentrated in low productivity, low wage sectors. Failures in supply chains are likely to be a factor holding back output too. There was a further large increase in uncertainty in April.

Chapelle, 20 May 2020

Non-pharmaceutical interventions such as school closures and social distancing were implemented in the US against the spread of the 1918 influenza pandemic. This column explores the effect of these interventions on economic activity and death rates in US cities during and after 1918. The policies lowered the fatality rate during the peak of the pandemic but are associated with a significant rise in the death rate in subsequent years, possibly through reducing herd immunity. Their impact, positive or negative, on the growth of the manufacturing sector in US cities remains an open question.

Frey, Presidente, Chen, 20 May 2020

Democracy has been in recession for over a decade and many fear that Covid-19 will accelerate this trend. This column analyses the stringency and effectiveness of various countries’ policy responses to Covid-19. While autocratic regimes tend to take more stringent policy measures, such measures tend to be less effective in reducing mobility in autocratic countries compared to democracies. Comparing countries with a collectivist versus an individualist culture shows that the former have been more successful in taking measures to reduce mobility.

Daly, Gedminas, Grafe, 20 May 2020

Although the COVID-19 crisis is a global phenomenon, emerging market economies are in a weaker position than developed economies to absorb its fiscal costs. This column assesses the impact of the crisis on government deficits and debt levels in emerging markets, and the fiscal adjustments that are likely to be required in the aftermath of the crisis. The findings suggest that median government debt will rise by around ten percentage points of GDP and that most emerging economies will face painful post-crisis adjustments. The results also imply a strikingly wide range of outcomes across emerging economies around the world.

Darmouni, Giesecke, Rodnyansky, 20 May 2020

The share of firms’ borrowing from bond markets has been rising globally. This column argues that euro area companies with more bond debt are disproportionately affected by surprise monetary shocks, compared to firms with mostly bank debt. This finding stands in contrast to the predictions of a standard bank lending channel and points toward frictions in bond financing. This provides lessons for the conduct of monetary policy in times of hardship such as COVID-19, when the corporate sector suffers from liquidity shortages.

Agur, Ari, Dell'Ariccia, 19 May 2020

Various central banks are currently weighing up the introduction of central bank digital currency. This column proposes a framework that captures the key features and studies the implications of such a payment system. Central bank digital currency can be designed with attributes similar to cash or deposits. Currency that closely competes with deposits would likely depress bank credit, while cash-like currency could lead to the disappearance of cash. The optimal central bank digital currency design hence trades off bank intermediation against the social value of maintaining diverse payment instruments. The currency could be interest-bearing, which may help alleviate this trade-off.

Braun, Dwenger, 19 May 2020

The procedures for relocating forced migrants differ considerably across countries, and information about how resettlement locations within host countries affect integration outcomes remains scarce. And yet, the number of forced migrants around the world increased dramatically over the last decade and continues to grow. This column studies displaced Germans after WWII and finds they fared poorly when relocated to agrarian regions with high migrant density. The authors recommend that current resettlement policies avoid directing large concentrations of migrants to a limited selection of rural areas.

Ciminelli, Garcia-Mandicó, 19 May 2020

As many countries around the world are finally past the first peak of the pandemic, it is time to assess what could be done better in case of a second wave. This column analyses the management of COVID-19 in Italy using newly available death registry data covering almost all Italian municipalities. The findings suggest that the closure of non-essential services reduced mortality, while shutting down factories did not. Additionally, within the area of the epidemic epicentre, mortality was up to 50% higher in municipalities far from an ICU, a sign that congestion of the emergency care system may have prevented critical patients from being treated on time.

Broeders, Goy, Petersen, de Vette, 19 May 2020

Inflation-linked financial instruments are widely used to infer market-based inflation expectations and inflation risk. Following the outbreak of COVID-19 and an unprecedented oil price shock, the euro five-year, five-year inflation-linked swap is currently hovering around an all-time low of just below 1%. This column shows that around 60% of the drop the swap rate since 2015 can be attributed to the inflation risk premium, while the inflation expectations component explains the remaining 40%. In addition, inflation option prices reveal that the distribution surrounding inflation expectations has shifted to the left since January 2020, suggesting that markets expect the outbreak of COVID-19 to be a persistent disinflationary shock.

Aron, Muellbauer, 18 May 2020

Excess mortality data avoid miscounting deaths from under-reporting of Covid-19-related deaths and other health conditions left untreated. According to EuroMOMO, which tracks excess mortality for 24 European states, England had the highest peak weekly excess mortality in total, for the over-65s, and, most strikingly, for the 15-64 age group. This column argues that research is needed into such divergent patterns. It suggests that national statistical offices should publish P-scores (excess deaths divided by ‘normal’ deaths) for states and sub-regions, and permit EuroMOMO to publish P-scores as well as their less transparent Z-scores. This would aid comparability, better inform pandemic policy, and allow lessons to be drawn across heterogeneous regions and countries. 

Bartscher, Kuhn, Schularick, 18 May 2020

Household debt-to-income has quadrupled in the US since WWII. This column presents historical evidence suggesting that debt-to-income ratios have risen most dramatically for middle-class households with low income growth. Middle-class households have increasingly tapped into rising housing wealth to finance spending in excess of income. Home-equity based borrowing accounts for 50% of the increase in US housing debt and turned the middle-class into the epicentre of financial fragility. 

Baghai, Silva, Thell, Vig, 18 May 2020

Businesses worldwide are reeling from the fallout caused by the COVID-19 pandemic, and a surge in bankruptcies is expected. Using micro-data and a large sample of Swedish bankruptcies from 2003 to 2011, this column documents how firms lose workers with the highest cognitive and noncognitive skills as they approach bankruptcy. Historical analysis suggests that the current high levels of leverage, combined with the reliance on skilled labour in modern firms, will pose unique challenges to businesses trying to weather the storm ahead.

Ciccone, Ismailov, 17 May 2020

Persistence of democratisation following transitory economic shocks plays an important role in the theory of political institutions. This column tests the theory of democratic tipping points using rainfall shocks in the world’s most agricultural countries since 1946. Negative rainfall shocks have a strong and transitory effect on agricultural output, but a persistent positive effect on the probability of democratisation even after ten years. These findings suggest that even if it were short-lived, the COVID-19 crisis is likely to tip the scales against some authoritarian regimes and lead to persistent democratisation.

Heiland, Ulltveit-Moe, 17 May 2020

As almost 80% of trade is carried by sea, it is evident that disruptions to sea transport can damage trade flows and disrupt supply chains. COVID-19 containment policies have hit sea transport severely. Many key ports have imposed restrictions on vessels and crew, including prohibitions that have stopped crew changes. Satellite data for ships show that sailings to destinations with crew-change restrictions are down by almost 20% for container ships compared to previous years. More flexible regulations based on screening and discretion are needed to ensure the continuity of freight distribution in order to secure that supply chains do not get a double hit.

Becker, Hornung, 17 May 2020

The Prussian three-class franchise is a classic example of a system that politically over-represented the economic elite. Contrary to the predominant and simplistic view that the system allowed the landed elites to capture most political rents, this column finds that, conditional on land ownership inequality, MPs from constituencies with a higher vote inequality support more liberal policies, gauging their political orientation from the universe of roll call votes cast in parliament during Prussia’s rapid industrialisation in the second half of the 19th century.

Platteau, Verardi, 16 May 2020

One puzzle that arises in connection with the spread of Covid-19 is why there is such large variation in infection and death rates both across as well as within countries. This column argues that differences in the way people, and in particular different age groups, interact can explain part of this variation. Simulations show that the measures Belgium would need to take when re-opening its economy would be more moderate if it had the same interaction patterns as Germany, and more strict if it had Italy’s interaction patterns. A key lesson is that there is no one-size-fits-all solution that could be applied to all countries, or even to all regions within a country.

Briscese, Lacetera, Macis, Tonin, 16 May 2020

Many governments have enacted stringent ‘stay-at-home’ policies to mitigate the spread of the COVID-19 pandemic. This column reports evidence from a series of surveys of representative samples of the Italian population on their willingness to comply with the lockdown. The results indicate that people are less compliant if self-isolation measures are extended for longer than expected, which suggests that managing expectations is critical. This finding could be valuable if new waves of infections force governments to re-introduce lockdowns.

Goodhart, Needham, 16 May 2020

The COVID-19 crisis presents a multi-faceted challenge to policymakers. A combination of declining commodity prices, the rise in unemployment, and emergency state spending are all set to create challenging economic conditions, even as the pandemic itself subsides. This column argues that one mechanism that could help control long-run inflation levels is the issuance of long-dated gilts. This would also help to protect the young and unborn generations from the threat of resurgent inflation, which could lead to a massive rise in their future debt service requirements. 

del Rio-Chanona, Mealy, Pichler, Lafond, Farmer, 16 May 2020

Many researchers have studied the adverse impacts of the negative supply shock due to measures taken to combat the spread of COVID-19. This column provides estimates of occupation- and industry-specific effects of both the supply and the demand shock for the US. US GDP is predicted to decline by 22% compared to the pre-COVID-19 period, and 24% of US jobs are likely to be vulnerable. The adverse effects are further estimated to be strongest for low-wage workers who might face employment reductions of up to 42% while high-wage workers are estimated to experience a 7% decrease.

Hagedorn, Mitman, 15 May 2020

Heterogeneous-Agent New Keynesian models offer new perspectives on fiscal and monetary policy interaction in the euro area. The current question is whether ECB measures are predominantly motivated to ensure price stability (with fiscal consequences a side effect), or whether they are motivated by an overriding economic policy objective. This column presents evidence that, according to the HANK models, there is no distinct separation between fiscal and monetary policy. Fiscal policy is an important determinant of inflation at the zero lower bound, and properly designed asset purchases are an effective instrument to satisfy the price stability mandate.

Andersen, Hansen, Johannesen, Sheridan, 15 May 2020

The COVID-19 pandemic has had drastic effects on consumer spending across the world. This column presents evidence based on bank account transaction data from Denmark showing that total card spending was reduced by 25% during the early phase of the crisis. The drop was mostly concentrated on goods and services whose supply is directly restricted by government interventions, suggesting a limited role for spillovers to non-restricted sectors through demand in the short term.

Maloney, Taskin, 15 May 2020

Social distancing is critical to reducing the propagation of COVID-19. This column argues that in developed countries, mandatory policies matter less than voluntary demobilisation in reducing mobility and enabling social distancing.  An analysis using Google mobility data reveals significant declines in restaurant reservations in the US and movie theatre revenues in Sweden before the imposition of government non-pharmaceutical interventions. While this behaviour will help reduce mobility and the spread of the virus, it may also slow the economic recovery that follows. 

Fujita, Moscarini, Postel-Vinay, 15 May 2020

Current government policies addressing the COVID-19 crisis protect the hardest-hit workers and jobs. The world economy, however, is already experiencing needs for employment reallocation towards certain essential activities. This column proposes a policy framework to resolve the trade-off between protecting valuable match-specific capital and restoring the desired pace of healthy reallocation. The scheme leverages the distinct age profile of COVID-19 health risks, matching capital, and worker reallocation, by tailoring furlough subsidies, wage subsidies, and unemployment insurance to worker age.

Assenza, Collard, Dupaigne, Feve, Hellwig, Kankanamge, Werquin, 15 May 2020

How should governments balance controlling the COVID-19 pandemic with limiting its economic costs? This column argues that health policy and economic policy objectives in pandemic control are not that far apart, and that the epidemiological strategies adopted by many countries – aptly described as a ‘hammer and dance’ – are also based on sound economic principles. By paying close attention to behavioural responses and externalities, the authors offer concrete prescriptions for lockdown and recovery policies.

Corsetti, Erce, Garcia Pascual, 14 May 2020

Prominent voices propose financing the European Recovery Fund using joint perpetual debt. This column argues that there are gains from using European borrowing and lending as two separate policy levers. In a world of ultra-accommodative monetary policy, financing the Fund issuing debt at shorter maturities and passing those low interest rates onto member states through loans with low margin and with very long maturities is financially cheaper. Supporting the recovery through this maturity transformation would reinforce debt sustainability across the EU.

Cerra, Fatás, Saxena, 14 May 2020

As many countries enter deep economic downturns, many wonder about the shape and length of the recession, as well as the steepness of the recovery. Past recessions have left permanent scars on long-term growth, known as hysteresis. This column reviews the hysteresis academic literature to gain insights on the current crisis and the policies that should be put in place to minimise its long-term effects. Continued macroeconomic stimulus, where policy space exists, is needed using an array of instruments. Now is not the time to err on the side of caution when it comes to expansionary economic policies.

Tekin-Koru, 14 May 2020

The strict and prolonged age-specific containment measures in Turkey have both reduced infection/death rates and enabled less strict restrictions for the lower-risk groups. This column reviews Turkey’s response and examines the real-time effects of the COVID-19 crisis on production in Turkey. If finds that the targeted containment measures appear to have helped reduce a contraction in production that could have been much worse with a uniform lockdown. It also finds that the major brunt of the health crisis in terms of its human costs has been borne by the working class.

Howell, Lerner, Nanda, Townsend, 14 May 2020

Governments worldwide have taken steps to bolster their venture capital sectors in response to the COVID-19 crisis. This column questions whether venture-backed innovation is particularly vulnerable to economic downturns, and finds that early-stage venture investment falls sharply during recessions. The quantity and quality of venture-backed innovation declines particularly for early-stage firms, underscoring the concerns that motivate such policy initiatives. Still, questions remain about the optimal design and public return of these expenditures.

Gürkaynak, Lucas, 14 May 2020

The current macroeconomic policy scene in advanced economies is dominated by three interrelated challenges: rapidly meeting the unprecedented spending needs to respond to the COVID-19 crisis, while holding government debt to a sustainable level and avoiding deflation. This column argues that monetising some of the pandemic-related debt would be the best way to address all three issues simultaneously, even if it risks some future above-target inflation. It proposes a particular mechanism for debt monetisation, with the proceeds used to fund the partial replacement of lost wages through the banking system. The proposed mechanism effectively monetizes the cost of the programme, in contrast to central banks' current debt purchase programmes which, for the most part, have not yet resulted in monetisation.   

Buettner, Kreidl, 14 May 2020

Investors have increasingly used the instrument of withholding taxes to evade dividend taxation, employing ‘cum-ex’ transactions around ex-dividend dates. Using German stock trading data, this column provides evidence for these types of transactions, showing that there is a substantial increase in the number of stocks traded immediately before the ex-dividend date, with much stronger increases in ‘over-the-counter’ transactions, where trades are particularly easy to arrange.  Given the evidence, withholding-tax non-compliance in the form of cum-ex transactions should not be regarded as some type of financial market arbitrage exploiting a tax loophole but a form of deliberate tax fraud.

Krueger, 14 May 2020

Do we close our public spaces to protect our communities from Covid-19, or keep them open, as in Sweden? Dirk Krueger tells Tim Phillips that informing the public and then trusting individuals to make good choices might deliver a decline in infections, while minimising the Covid recession.

Download Covid Economics 5, including Dirk's paper.
Picture: Creative Commons/Vogler

Bordignon, Tabellini, 13 May 2020

The subsidiarity principle implies that the EU should do what member countries cannot do by themselves. In the context of the current crisis, this implies issuing very long-term debt. This column argues that this could be achieved by endowing the new EU Recovery Fund with genuinely own EU sources of revenue. Providing the EU with revenue from EU own tax bases would also improve the quality of EU expenditures, and could pave the way to the creation of a euro area fiscal capacity.

Bianchi, Faccini, Melosi, 13 May 2020

Fighting the consequences of the COVID-19 pandemic poses a difficult task for fiscal and monetary authorities alike. The current low interest rate environment limits the tools of central banks while the record high debt levels curtail the efficacy of fiscal interventions. This column proposes a coordinated policy strategy aiming at creating a controlled rise of inflation and an increase in fiscal space in response to the COVID-19 shock. The strategy consists of the fiscal authority introducing an emergency budget while the monetary authority tolerates an increase in inflation to accommodate this emergency budget.

Parry, Bandiera, Best, Khan, Prat, 13 May 2020

Weak procurement systems can lead to high wastefulness and reduce the amount of resources government have for vital expenditures. This column examines the behaviour of 600 procurement officers in Pakistan and finds that the savings realised through giving them greater autonomy were considerably greater than from pay-for-performance incentive schemes, though this result did depend on the relative efficiency of the procurement officers and their monitors. This finding indicates that, counter-intuitively, the appropriate response to inefficiency and corruption may sometimes be less monitoring, not more.

Kondo, Miyakawa, Shiraki, Suga, Usuki, 13 May 2020

Detecting and preventing accounting fraud is a concern for many policymakers around the world. This column presents a framework that incorporates machine learning techniques to detect and forecast fraudulent behaviour by firms when reporting financial information. The framework relies on a larger set of firm information to achieve better detection performance and, unlike previous frameworks, provides forecasts for potential future accounting fraud.

Chen, Qiu, 13 May 2020

The COVID-19 pandemic has prompted a vast spectrum of unprecedented government interventions. This column discusses the impact of various interventions on COVID-19 transmission dynamics and the associated economic consequences. Examining the variation in government policies, it finds that policies such as lockdown, school closure, centralised quarantine and mask wearing are effective in controlling the virus transmission. A series of scenario analyses suggest that countries may avoid lockdown by imposing school closures, mask wearing and centralised quarantine simultaneously to reach similar COVID-19 infection mitigation outcomes.

Ma, Rogers, Zhou, 13 May 2020

Forecasting the progress and impact of COVID-19 is central to the planning of policymakers around the world. This column provides a historical perspective by examining the immediate and bounce-back effects from six post-war disease shocks. GDP growth contractions are immediate and sizeable, but vary across countries. Despite an immediate ‘bounce back’, GDP tends to remain below its pre-shock level for several years. The negative effect on GDP is felt less in countries with larger first-year responses in government spending, especially on health care, and the indirect effects on GDP growth from affected trading partners are also important.

Coibion, Gorodnichenko, Weber, 12 May 2020

Business cycles are rarely a matter of life or death in advanced economies, but the COVID-19 crisis is forcing policymakers into painful trade-offs between saving lives and saving the economy. This column uses several waves of a customised survey to study the economic costs of US lockdowns in terms of spending, labour market outcomes, and macroeconomic expectations. It finds overall spending drops of more than 30%, unemployment expectations climbing more than 10%, inflation expectations falling, uncertainty rising, and plans to purchase large durables plummeting.

Beck, Radev, Schnabel, 12 May 2020

Bank resolution regimes designed to deal with idiosyncratic bank distress have been widely established or upgraded over the last decade. This column shows however, that more comprehensive resolution regimes may increase systemic risk in response to a system-wide shock. Hence, bank resolution regimes may benefit from a macroprudential design, including a strictly defined financial stability exemption for bail-in rules during periods of systemic distress.

Pacitti, Hughes, Leslie, McCurdy, Smith, Tomlinson, 12 May 2020

With experts warning that social distancing measures could remain in place for much of this year in the UK, the fiscal pressures faced by the government could well be much more severe than recent official forecasts suggest. Drawing on three scenarios for the economic impact of social distancing lasting for 3, 6 or 12 months, this column looks at the impact on the UK public finances. It suggests that borrowing will rise to historic highs in all three scenarios. This poses liquidity challenges for the government in the near term, and leaves the government more vulnerable to changes in interest rates or inflation in the medium term given far higher debt stocks.

Weil, Gürkaynak, Fernald, Pappa, Trigari, 12 May 2020

The contraction in the euro area economic activity is clear. The CEPR-EABCN Euro Area Business Cycle Dating Committee notes that it is the path activity will take from here on that will determine how this episode will be designated. Policies that counter the endogenous propagation of the pandemic shock may lead to a double-peak expansion, an expansion ongoing since 2013 interrupted by the pandemic shock, whereas continued decline in activity after the health shock is over will characterize a particularly deep recession. This column discusses the conceptual issues involved in making cyclical taxonomies.

Engle, Stromme, Zhou, 12 May 2020

Lockdown policies are used to ‘flatten the curve’, but their success rate remains uncertain. This column uses GPS data from mobile phones in the US to show that stay-at-home orders do reduce mobility. However, voluntary reductions are also important, regardless of stay-at-home orders. Counties with a higher share of older people or a lower share of Republican votes are more responsive to lockdown measures. Further, counties with a larger share of jobs that are ‘teleworkable’, a higher median income, or a lower use of public transit are also more responsive, suggesting that multiple factors must be considered.  

Berg, Bonnet, Soares, 11 May 2020

Working from home can help mitigate the public health and economic consequences of the COVID-19 pandemic. This column estimates the share of workers across the different regions of the world who could potentially perform their activities from home, using a Delphi survey of labour market experts from across the world and then weighing these estimates by countries’ occupational shares. The analysis shows that approximately one in six workers at the global level, and just over one in four in advanced countries, could potentially work from home.  

Leslie, Hughes, McCurdy, Pacitti, Smith, Tomlinson, 11 May 2020

The scale of the economic impact of coronavirus is only starting to become clear, but effective government policy responses depend on realistic estimates of the depth and length of the recession. Drawing on theory, experience from past viral outbreaks, and real-time data, this column presents three scenarios for the UK economy over the next five years. Economic outcomes could easily be worse than many current forecasts. Crucially, the duration and strictness of social distancing restrictions will define the total loss in output during the crisis and influence the likely pace of recovery post-crisis.

Painter, Qiu, 11 May 2020

Social distancing is vital to mitigate the spread of the novel coronavirus. Leveraging smartphone geolocation data, this column examines how political beliefs impact the effectiveness of state-level social distancing orders in the US. The findings suggest that Republicans and misaligned Democrats are less likely to adhere to social distancing orders. Bipartisan support for social distancing measures thus appears to be a key factor in how quickly we can mitigate the spread of the novel coronavirus.

Lim, 11 May 2020

Large fiscal expenditures, as well as more loans by households and firms, will lead to sharp increases in public and private debt in the near future. The resulting debt burdens may impact both post-lockdown economic recovery and medium-run growth prospects. This column presents evidence on the effects of the total debt burden on output dynamics. The results suggest increases in total debt to GDP have significant negative effects on growth. Helping economies recover from the dramatic COVID-19 shock will require tackling both public and private borrowing. 

Chen, Igan, Pierri, Presbitero, 11 May 2020

The COVID-19 pandemic and the associated lockdowns have led to unprecedented economic costs around the world. Using high-frequency indicators, this column shows that while COVID-19 is a global shock, European countries and US states with larger outbreaks have suffered significantly larger economic losses. The impact of COVID-19 is mostly captured by changes in people’s observed mobility whereas, so far, there is no robust evidence supporting additional impact from the adoption of non-pharmaceutical interventions, especially in the US. The results indicate a crucial role for communication and trust-building.

Wyplosz, Weder di Mauro, 11 May 2020

CEPR’s new vehicle for rapidly vetting and disseminating economic research on Covid-related issues is thriving – attracting something like six papers per day with about 40% passing the rapid, up-down vetting process. From its founding, the idea was that papers issued in Covid Economics would be submitted to professional journals after revision. Leading journals in the profession – including AER, JPE, REStud, and QJE – have accepted that appearing in Covid Economics does not constitute publication but rather is viewed as a posting in a working paper series. 

Dahl, Felfe, Frijters, Rainer, 10 May 2020

Granting birth-right citizenship to immigrant youth has the policy goal of increasing assimilation and welfare.  But could it have unintended consequences if the parents value a more traditional outcome? This column uses a reform in Germany and survey data of school children to show that birth-right citizenship lowers life satisfaction and self-esteem for Muslim immigrant girls, but not boys. For these girls, it also results in family and career anxiety, reduced parental investments in schooling and language, less self-identification as German, and more social isolation.

Kilic, Marin, 10 May 2020

In the wake of the Global Crisis, uncertainty in the world economy led many firms to reassess their business models. Rather than relying on global supply chains, an increasing number of firms invested in robots, which prompted a renaissance of manufacturing in industrialised countries. This column argues that changes in the world economy due to COVID-19 make a V-shaped recovery from the coming recession unlikely. Instead, COVID-19 will accelerate the process begun after the Global Crisis by encouraging firms to re-shore activity back to rich countries.

Baunez, Degoulet, Luchini, Pintus, Teschl, 10 May 2020

Tests are crucial to detect people who have been infected by COVID-19 and to observe in real time whether the dynamics of the pandemic are accelerating or decelerating. However, tests are a scarce resource in many countries. This column proposes a data-driven and operational criterion to allocate tests efficiently across regions, with a view to maximising the fraction of tested people who are positive. When applied to Italian regions, the criterion reveals that the shares of tests that should go to each region differ significantly from the present distribution.

Krugman, 10 May 2020

Policymakers are frantically trying to come up with a policy response to the Covid-19 crisis. This column, taken from a recent Vox eBook, argues that there is a very good case for putting a sustained, productive programme of stimulus in place as soon as possible, instead of scrambling to come up with short-term measures every time bad things happen. 

Jeeneea, Sukon, 09 May 2020

The government of Mauritius responded early to the COVID-19 pandemic with stringent lockdown measures and saw a drastic reduction in new cases. This column examines the Mauritian response and estimates that the measures led to an 80% reduction in the coronavirus transmission rate. A well-implemented and early ‘hard lockdown’ can be effective in managing the spread of COVID-19.

Ambrocio, 09 May 2020

Across Europe, the COVID-19 pandemic has led to sharp declines in household sentiment and increases in the dispersion of household views about the state of the economy as well as their own individual finances. In contrast, household uncertainty has been left relatively unchanged. This column finds that the drop in household sentiment is larger in countries where the containment measures put in place to address the pandemic are more stringent, suggesting notable additional costs to the lockdown measures.

Torrejón Pérez, Fana, González-Vázquez, Fernández-Macías, 09 May 2020

The COVID-19 economic crisis is having a huge impact on employment in the EU, calling for swift policy action targeting the most affected sectors and countries. This column makes an assessment of the labour market impact of the confinement measures put in place by EU governments. It finds that these restrictions are likely to have a very asymmetric effect across EU labour markets, with the most negative employment impact concentrating in the most vulnerable countries and categories of workers.

Ibikunle, Rzayev, 09 May 2020

Dark pools, which are trading venues that do not offer pre-trade transparency, are often suspected of causing difficulties with price discovery, and of adversely affecting market quality. This column studies the effects of COVID-19-induced volatility on trading in dark pools. Increased volatility is found to be linked with an economically significant shift of market share from dark pools to lit exchanges.

Morelli, 08 May 2020

Political participation is an important, and often neglected, channel through which economic insecurity, reductions in trust, and changes in cultural attitudes all affect populism. This column argues both the demand for and supply of populism depend on mobilisation, and that populism can be seen as a mobilisation campaign strategy. While this framework explains the recent surge of populism, it also provides reasons to believe that the populism wave could be temporary. The column also discusses possible consequences of the Covid-19 crisis for populists in and out of power.

De Cao, Sandner, 08 May 2020

COVID-19 is altering family dynamics in ways that threaten to put already vulnerable children at increased risk of abuse and neglect. This column describes the latest empirical evidence charting how a decline in childcare availability and employment can affect the treatment of children within families. Recommending that the immense costs of child maltreatment be considered in cost-benefit calculations of lockdown measures, the column also urges governments to work with social and health care providers to integrate children’s welfare in future risk reduction and preparedness.

Tubadji, Webber, Boy, 08 May 2020

The COVID-19 pandemic is a deadly threat to human life on our planet. This column uses a spatial analytical approach to show that the pandemic has disproportionately affected the economically and socially vulnerable places across the UK along the lines of existing economic and cultural divides. The pandemic is likely to exacerbate existing real and perceived deprivation on the brink of an expected economic shock at the end of the Brexit implementation period. If health deprivation is compounded by Brexit-related economic blows, greater protests are likely to be the result.

Andersson, Jonung, 08 May 2020

Negative interest rates were once seen as impossible outside the realm of economic theory. However, recently several central banks have imposed such rates, with prominent economists supporting this move. This column investigates the actual effects of negative interest rates, taking evidence from the Swedish experience during 2015-2019. It is evident that the policy’s effect on the inflation rate was modest, and that it contributed to increased financial vulnerabilities. The lesson from the experiment is clear: Do not do it again.

Furceri, Loungani, Ostry, Pizzuto, 08 May 2020

Major epidemics in this century have raised income inequality and hurt the employment prospects of people with low educational attainment, while scarcely affecting those with advanced degrees. This column argues that the COVID-19 pandemic could have similar distributional consequences unless this time is different and government policies end up being effective in raising boats more than yachts.

Edgerton, 08 May 2020

On the 75 anniversary of the VE Day, David Edgerton tells Tim Phillips that Britain's belief in its go-it-alone scientific and inventive genius is “deluded”, and has stunted the nation's postwar growth.
Download The Economics of the Second World War Seventy-Five Years On, featuring David's chapter.

Hoekman, Nelson, 08 May 2020

Prior to the re-emergence of tariff nationalism as espoused by the Trump administration, subsidies were becoming a central source of trade tensions between major economies. The prospect of trade conflicts associated with the use of such instruments to combat climate change was increasing. Policy responses to the COVID-19 pandemic have led to a massive increase in subsidisation of firms in many countries. This column argues for a revisit of current approaches to addressing subsidy conflicts. The need for cooperation between the major economies to manage the international competitive spillovers of subsidies was evident pre-COVID-19. It has now become much more urgent.

Bennedsen, Simintzi, Tsoutsoura, Wolfenzon, 07 May 2020

Many countries are introducing mandatory wage transparency to address the seemingly intractable gender wage gap, but evidence of its effects on gender pay disparities and firm outcomes has, to date, been limited. To examine the benefits and costs of such policies, this column analyses the wages of firms prior to and following the introduction of Denmark’s 2006 Act on Gender Specific Pay Statistics. Mandatory transparency legislation reduced gender pay disparity, primarily by slowing down the growth of men's wages.

Barnett-Howell, Mobarak, 07 May 2020

Governments around the world have implemented social distancing and lockdown policies designed to inhibit the spread of the coronavirus by restricting the movement and everyday activity of billions of people. This column uses the Imperial College London COVID-19 Response Team’s epidemiological model to estimate the benefit from a set of social distancing and suppression policies in different countries. A younger population, less susceptible to the disease and less willing to exchange economic wellbeing for risk reduction, means that lockdown measures are likely to be less valuable in poorer countries. 

Daniele, Piolatto, Sas, 07 May 2020

Polarisation, populism, and extremism are on the rise on both sides of the Atlantic. This column focuses on the role of policies in multi-level federations (such as the EU) in partially explaining the rise of extreme political parties. An analysis of differences in vote shares between European and national parliamentary elections suggests that support for extreme politicians is highest in countries with the largest gains and losses from federal policies. Eurosceptic parties, which are very protective of national interests, win higher shares of the EU vote in core and periphery countries, whilst the opposite is true for countries in the middle.

Cabral, Xu, 07 May 2020

As with other crises, the COVID-19 pandemic has seen sudden excess demand for certain goods and consequent price surges. Such price hikes often lead the public to call for laws protecting consumers from price gouging. This column provides evidence that larger and older sellers engage less in price gouging as they risk greater reputational loss from hiking prices in response to excess demand. Policymakers might use seller reputation as a policy tool by barring new sellers from setting prices higher than incumbent sellers.

Elgin, Basbug, Yalaman, 07 May 2020

The economic measures that governments around the world have taken in response to the Covid-19 pandemic vary in breadth and scope. This column presents a comprehensive review of the measures adopted by 166 countries. The findings show that the median age of the population, the number of hospital beds per capita, GDP per capita, and the number of total cases are all significantly associated with the extent of the economic policy response.

Blais, Bol, Giani, Loewen, 07 May 2020

Major crises can act as catalysts – either destabilising or strengthening the political regimes that oversee them, depending on how citizens view their government’s performance. This column analyses a cross-country survey in Western Europe during March and April, a period that saw many of these governments enforce lockdowns in response to COVID-19. It finds a rally effect: individuals who took the survey immediately after lockdowns showed more support for incumbents and for democratic institutions than those who took it before.

de la Escosura, Álvarez-Nogal, Santiago-Caballero, 07 May 2020

It is believed that living standards in world economies stayed roughly constant prior to 1800. This column presents data on Spanish population and economic development from 1277-1850 which challenges this view. Population and economic growth are found to evolve simultaneously, contradicting the Malthusian view. Spain was a frontier economy within Europe that, after a drop in living standards after the Black Death, grew steadily until the 1570s, when its path diverged from the rest of Europe. 

Baldwin, 07 May 2020

Thanks to the contributions of literally hundreds of policy-relevant economists from around the world, VoxEU.org has become a key global hub of research-based analysis of COVID-19 economic issues since early March 2020. This column presents some of the statistics and early milestones. For instance, it shows that in April 2020, VoxEU.org had 1.6 million page views from 767,000 users. 

Chronopoulos, Lukas, Wilson, 06 May 2020

Since the first COVID-19 cases were reported in January 2020, the UK government has introduced successive public health measures, culminating in late March 2020 with enforced closures of non-essential businesses and social distancing. These measures are significantly affecting UK household incomes and expenditures. This column exploits a large anonymised transaction-level dataset covering Great Britain to examine real-time consumer spending responses to the COVID-19 pandemic and related public policy measures. While there are differences by age, gender, and income level, overall consumer spending declined as the government lockdown becames imminent and has continued to decline since.

de Rassenfosse, Foray, Abi Younes, Ayoubi, Ballester, Cristelli, Gaulé, Pellegrino, van den Heuvel, Webster, Zhou, 06 May 2020

The COVID-19 crisis reflects a failure of the global health system. It also reflects well-known failures of the global science, technology, and innovation ecosystem, including systematic underinvestment in vaccine research. At the same time, the crisis reveals the extraordinary resilience of this ecosystem. This column argues that innovation is the only way out of the pandemic, and that formidable creative approaches and entrepreneurial forces are at play. Research in the economics of innovation helps in understanding some root causes of the present situation and sheds light on possible policy responses. 

Cleevely, Susskind, Vines, Vines, Wills, 06 May 2020

Relaxing the lockdowns imposed to control the Covid-19 pandemic requires a workable testing strategy for the population. This column argues that ‘stratified periodic testing’ can help economies return to work while keeping Covid-19 cases falling. This strategy would involve testing individuals within specified at-risk groups for infection at regular intervals, upwards of once every five days. This would be a better use of scarce testing resources than daily ‘universal random testing’ of the entire population.

DeStefano, Kneller, Timmis, 06 May 2020

The last decade has seen a fundamental shift in the way firms access technology, from physical hardware towards cloud computing. This shift not only significantly reduces the cost of such technologies but also allows for the possibility of remote and simultaneous access. This column presents evidence on the impact of cloud adoption by firms using firm level data from the UK. There are marked differences in the effects on young and incumbent firms, where cloud adoption largely impacts the growth of young firms while it affects the geography of incumbent firms.

Bosio, Djankov, 06 May 2020

With lockdown measures in place almost worldwide now, cash-flow represents a significant concern for firms across multiple sectors. It remains to be seen exactly which types of business will be able to weather the coming storm. This column estimates the survival time of nearly 7,000 firms in a dozen Southern European and emerging market economies. Under the assumptions that firms have no incoming revenues, the median survival time across industries ranges from 8 to 19 weeks. Once collapsed export demand is taken into account, the median survival time falls to between 8 and 14 weeks.

Bick, Blandin, 06 May 2020

As this column is published, the most recent government labour market statistics for the US refer to the week of 8-14 March, and so do not yet reflect the impact of the Covid-19 outbreak. This column uses a series of real-time labour market surveys of US households to document labour market outcomes more rapidly and more often than traditional government surveys. The estimates point to unprecedented devastation in the US labour market. New surveys will be run throughout the summer.

Guerrieri, Lorenzoni, Straub, Werning, 06 May 2020

The Covid-19 pandemic and the policies taken to control its spread have many features of an aggregate supply shock, as workers who stay home are prevented from producing goods and services. This column argues that when a supply shock asymmetrically affects different sectors of the economy, it can produce a contraction in demand even larger than the original shock, leading to deflationary pressures. This is due to complementarities across sectors and the fact that workers in different sectors are differentially affected and lack insurance.

Bloom, Guvenen, Salgado, 05 May 2020

During recessions, some firms and industries get hit far harder than others. This column argues that the current COVID-19 crisis is no exception. While most firms have experienced a negative demand shock, firms in the entertainment, services, and manufacturing sector have experienced a dramatic decline in sales that is likely to persist over several months. The increase in the probability of firm-level disasters or, more precisely, the decrease in the skewness of the distribution of firms’ shocks, will play a significant role in the response of aggregate output and employment. 

De Grauwe, Ji, 05 May 2020

In times of crisis and extreme uncertainty, forward-looking policymaking becomes difficult. In the midst of the Covid-19 crisis, major central banks appear to be adopting policies based on current conditions, rather than forecasts. This column generalises this observation in a behavioural macroeconomic model which compares forward-looking and current-looking monetary policy. Although both approaches perform similarly in normal times, current-looking monetary policy performs better in crisis periods. When uncertainty is extreme, prudent central banks should be guided by what they observe, and not by unreliable forecasts.

Schoenfeld, 05 May 2020

Are pandemics systemically important to modern-day financial markets? It is not obvious how a financial market’s myriad interconnected parts would react to a pandemic-induced supply and demand shock. This column shows that the COVID-19 pandemic triggered unprecedented changes in employment levels and the values of stocks, bonds, commodities, and currencies. Corporate managers also systematically underestimated their business-model exposure to pandemics in their annual report risk factors.

Irwin, 05 May 2020

The COVID-19 pandemic has led policymakers and business leaders to question whether global supply chains have been stretched too far. This column argues that the pandemic simply adds further momentum to the deglobalisation trend. The fourth era of globalisation appears to have peaked in 2008, and since then we have been in an era of ‘slowbalisation’.

Fasani, 05 May 2020

‘Key workers’ are performing these crucial tasks on the front line of Europe's COVID-19 response. This column describes how migrant workers are playing a critical role in performing basic functions in EU societies hit by the COVID-19 epidemic. In addition, low-educated migrants, not just high-skilled ones, are employed in occupations that are key for their host societies, which suggests the need to reconsider, once the crisis has passed, a migration policy debate which is currently almost entirely focused on the importance of attracting high-skilled migrants to the EU.

Borchert, Conconi, Di Ubaldo, Herghelegiu, 05 May 2020

The EU often conditions preferential access to its market on the achievement of non-trade policy objectives such as sustainable development, human rights, and good governance. This column studies the evolution of such objectives in EU trade agreements and Generalised System of Preferences (GSP) schemes over time, and reveals the legal and economic limitations of imposing conditionalities in trade agreements compared to the GSP. The findings suggest that if the EU wishes to rely more on trade policy to promote such objectives, it should focus on GSP programmes.

Garicano, 05 May 2020

The idea that Europe’s response to the economic crisis should be based on the issuance of common perpetual bonds has been slowly gaining ground, but proposals that entail substantial increases to member states’ debt risk hampering growth for decades to come. This column argues that the time has come for genuine European spending financed through European borrowing. It examines the legal and financial issues around the possible implementation of a proposal for the Commission to issue consolidated annuities (‘EU Consols’) to finance a €1 trillion economic reconstruction package.

Horn, Reinhart, Trebesch, 04 May 2020

COVID-19 is wreaking economic havoc, and its most severe consequences are likely to be felt in the developing world. Recession, depressed commodity prices, collapsing cross-border trade, and a flight to safety in financial markets have set the stage for a replay of the 1930s and 1980s debt crises. This column presents insights from a comprehensive new dataset on China’s overseas lending and shows that developing countries are much more indebted to China than previously known. Any effort to provide meaningful debt relief to the most vulnerable countries must encompass the debts owed to China.

Makris, 04 May 2020

Social distancing fits well in the economist’s analytical framework. This column discusses how epidemiological models can be enriched with individual social distancing decisions. Preliminary simulations show how an epidemic could be influenced by the interaction of private decisions and government measures on social distancing. The simulations highlight the importance of including economic insights in epidemiological simulations, rather than serving as forecasts.

Marchesi, Masi, 04 May 2020

As a consequence of the COVID-19 crisis, which will hit certain countries particularly hard (including those with official creditors), there may be a wave of debt restructuring over the next few years. This column argues that the specific characteristics of sovereign debt re-negotiations are important. In particular, it focuses on the link between sovereign restructurings and ratings, an issue that is of relevance but that has not received enough attention in recent research. 

Evenett, Winters, 04 May 2020

The world trading system has faced policy disruptions as nations have scrambled to find the necessary medical supplies to deal with the Covid-19 pandemic. This column suggests that in return for importing governments agreeing to keep their import restrictions at their current low levels, exporting governments agree to qualify the extent to which they can restrict shipments abroad. It presents a straightforward, WTO-consistent, time-limited proposal that countries can publicly commit to at any time.

Delfino, Sadun, 04 May 2020

As businesses emerge from lockdown, they will face the challenge of adopting new health and safety standards while maintaining profitability and productivity. Effective management will be crucial in aligning these private and social interests. This column explores how structured management training programmes – modelled after support given to European firms under the Marshall Plan – can help firms operate safely and productively in the Covid-19 era. It outlines several principles policymakers should follow in the design and implementation of these training programmes.

Broadberry, Harrison, 04 May 2020

WWII was the last time that Western societies were mobilised for an all-consuming conflict that demanded years of sacrifice and service from every citizen and every family. Such watershed moments are sometimes neglected in economics. This column presents a new VoxEU eBook that brings together recent research on a range of aspects of the war including the extensive war preparations of the great powers, the conduct of the war – including the management of economic mobilisation, economic warfare, economic exploitation, and the role of economists – and the war’s consequences for demography, inequality, economic recovery, and political attitudes.

Alekseeva, Azar, Gine, Samila, Taska, 03 May 2020

Artificial intelligence will transform job tasks and occupations. This column uses data from US online job postings during 2010–2019 to show how absolute and relative demand for AI-related skills has grown across all industry sectors and occupation groups. Jobs requiring AI skills command, on average, an 11% wage premium compared to similar jobs that do not require AI knowledge. However, AI is at least as much a managerial challenge as it is a technological challenge. Real productivity gains will come only when there are managers who can use AI to create and capture value.

Bethune, Korinek, 03 May 2020

At the centre of the debate on how to deal with the novel coronavirus is whether to aim for containment or herd immunity. A crucial factor in this decision is whether we are guided by individually optimising behaviour or by overall societal welfare, since COVID-19 gives rise to substantial externalities. This column calculates that while individuals perceive the cost of becoming infected to be $80,000 the true social cost is more than three times higher, and argues that public health authorities should use mandatory measures to account for these externalities. To ameliorate the costs of the trade-off, it is crucial to develop sufficient testing and tracing capacity so that untargeted lockdowns and the economic cost involved can be ended. 

Jedwab, Johnson, Koyama, 03 May 2020

The Black Death was accompanied by violence against Europe's Jewish communities. But not all Jewish communities were persecuted. This column outlines two countervailing effects that can help explain this variation: a scapegoating effect – as the disease worsened, there was an incentive to blame the outgroup – and a complementarities effect – Jews performed important roles in the medieval economy and these services became more valuable in the wake of the plague. Together, these effects shed light on the conditions under which prejudice and violence against minorities can be exacerbated or limited.

Kikuchi, Kitao, Mikoshiba, 03 May 2020

The COVID-19 crisis will be harder on low-income Japanese workers and will likely exacerbate inequality across the country. This column uses survey data to identify those workers most vulnerable to COVID-19 shocks, and consumption data to assess the pandemic’s economic effects in its initial weeks. The findings suggest that women were hurt more than men, while low-skilled and contingent workers suffered more than highly skilled and regular workers. The Japanese government should closely monitor labour market data and target any large-scale assistance towards the country’s most affected populations.

Ajzenman, Cavalcanti, Da Mata, 02 May 2020

Regardless of their scientific soundness, COVID-19 recommendations from political leaders such as President Trump are taken seriously by followers. In Brazil, President Bolsonaro has publicly flaunted social distancing measures and downplayed the seriousness of the disease in at least two well-publicised instances. This column analyses the effects of Bolsonaro’s actions and speeches in the month of March on Brazilians’ social-distancing behaviours, using electoral data and geo-localised mobile phone data from 60 million devices. The findings suggest that social distancing behaviour decreased in municipalities with stronger support for Bolsonaro.

Frankema, van Waijenburg, 02 May 2020

Despite a clear positive relationship between education and income at the micro-level, raising educational attainment rates in the developing world have so far failed to lead to substantial and sustained economic growth. This column collects data on skill premia for 50 African and Asian countries for 1870-2010 and presents evidence of a dramatic fall in skill premia from initially very high levels for both Asia and Africa over the course of the 20th century. This convergence of skill premia to Western levels is shown to be negatively related to the relative supply of educated workers in those economies.

Dhingra, 02 May 2020

The Covid-19 lockdown implemented in India is estimated to have tripled the urban unemployment rate. Most low-income urban workers will fall through the cracks of the provisions being put in place to support workers, and almost none of them has access to benefits. This column argues that the self-targeting features of a universal job guarantee make it an appealing policy option to protect informal workers in urban India both now and in the longer term.

Amano-Patiño, Faraglia, Giannitsarou, Hasna, 02 May 2020

The COVID-19 crisis has spurred a novel and fast-growing field in economic research. But women are not submitting new work at the same pace as their male counterparts. Using data from prominent repositories of working-paper publications in economics, this column suggests that the effects of lockdowns on the division of labour at home have been particularly detrimental to the research activity of women.

Chudik, Pesaran, Rebucci, 02 May 2020

China responded to the Covid-19 outbreak with draconian mandatory social distancing policies. Other countries have reacted more timidly, either by deliberate choice, as in the United States, or due to implementation constraints, as in some European countries, leaving individuals to choose for themselves an appropriate degree of self-isolation. This column, we argue that differences in mandated social distancing policies across countries have contributed to astonishingly different outcomes.

Mesnard, Seabright, 01 May 2020

Lockdowns imply the costly confinement of many healthy individuals for each infected person. Digital apps on smartphones can reduce this cost, but discussion has focused on contact-tracing apps. In addition to familiar security concerns, these can be exploited maliciously in order to disrupt activity or impose quarantine on rivals. This column proposes instead ‘Activity Apps’, which have modest data requirements and less disruptive potential, but can match individuals to activities in ways that may substantially reduce the costs of controlling Covid-19.

Chang, Velasco, 01 May 2020

Much has been written about the stark choice facing governments in the wake of COVID-19. Should they preserve lives or livelihoods? Less has been said about the equally stark choices facing ordinary citizens, yet the decisions they make every day – whether or not to comply with lockdown and social distancing measures, for instance – are as important as those made by their governments. This column argues that if economic policy incentives are responsible for even a fraction of compliance rates, then policy has a crucial role to play in the fight against Covid-19.

Chen, Juvenal, 01 May 2020

Does price discrimination of exporters depend on trade costs and/or product quality? Using firm-level data, this column investigates how exporters adjust their markups across destinations depending on trade costs – such as tariffs and bilateral distance – and the quality of their exports. The theoretical and empirical evidence shows that exporters raise markups in more distant markets but lower them in countries with higher tariffs. However, the response of markups to changes in trade costs is heterogeneous and smaller in magnitude for higher quality exports.

Noy, Doan, Ferrarini, Park, 01 May 2020

The economic risk of an epidemic is distinct from its health risk. In the case of COVID-19, financial and institutional capacity are key determinants of an economy’s resilience to the shock. This column assesses the economic risks associated with the coronavirus pandemic across the world. The evidence shows that economic risks are especially high in Africa, Iran, South and Southeast Asia. Although healthcare systems are better equipped to handle the crisis than in previous pandemics, the globalisation of trade and labour flows will likely amplify the risks to the global economy.

Kolasa, Wesołowski, 01 May 2020

Several major central banks announced new rounds of massive asset purchases following the outbreak of the Covid-19 pandemic. This policy instrument seems to have performed well for economies that have been implementing it since the Global Crisis, but its spillover impact on external countries has remained a bone of contention within the policy debate. Using previous episodes of quantitative easing as a guideline, this column analyses its international spillovers, showing that they are qualitatively and quantitatively different from the impact of changing short-term rates by the major central banks.

Stellinger, Isakson, Berglund, 01 May 2020

The world is in the midst of a dual crisis, threatening both the health of millions of people and the world economy. The crisis also touches upon various aspects of trade policy. Once the immediate crisis has abated it is not unlikely that the major trade debate will be about reshoring production. The argument goes that it is dangerous – both from an economic point of view and from a public health perspective – to be so dependent on imports. This column argues that the opposite is in fact true.

Balleer, Gehrke, Hochmuth, Merkl, 01 May 2020

In response to the COVID-19 crisis, the EU has implemented the SURE programme which provides loans up to €100 billion to member states for the support of short-time work systems. In order to obtain the maximum unemployment stabilisation with these funds, this column argues that the SURE loans should be used to support rule-based short-time work systems that require workers’ consent and that are aligned with national short-term unemployment benefit systems. During the COVID-19 crisis, additions to these rules may be appropriate.

Conti, 01 May 2020

While the COVID-19 pandemic has global reach, it is not affecting everyone equally. This column focuses on the first years of life and notes how the pandemic is likely to have more adverse effects for vulnerable parents and children. Given that early experiences can have an enduring impact on long-term health and socioeconomic outcomes, it argues that sustaining early childhood interventions is critical to avoid the worsening of inequalities in human development.

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