Global economy

Rabah Arezki, Ha Nguyen, 01 April 2020

Countries in the Middle East and North Africa face a dual shock from the COVID-19 pandemic and a collapse in oil prices. This column explores the policy options available to deal with such shocks, arguing that authorities should sequence and tailor their responses. MENA countries should first focus on responding to the health emergency and economic depression, postponing fiscal consolidation linked to the persistent drop in oil prices until the recovery from the pandemic is well underway. 

Mathias Dewatripont, Michel Goldman, Eric Muraille, Jean-Philippe Platteau, 23 March 2020

The first phase of the economic response to the COVID-19 pandemic is already under way with measures that, while costly, are relatively ‘easy’. The second phase – restarting the economy – involves the more challenging task of overcoming people’s fears of contracting the virus from a co-worker. This column describes how a combination of two currently available tests could identify people who are both free from COVID-19 and immune to it, and thus are safe to go back to work. A targeted scaling-up of procedures for both tests will help maintain vital services and accelerate the relaunch of the economy, while minimising the risk of the epidemic recurring after restrictions are lifted.

Aida Caldera, Alessandro Maravalle, Lukasz Rawdanowicz, Ana Sanchez Chico, 23 March 2020

Global economic growth is expected to remain weak and significant downside risks persist. As room for conventional monetary policy is limited or exhausted, policymakers will need to rely increasingly on fiscal policy to stabilise the economy during the next economic downturn. This column presents new OECD estimates which suggest that automatic stabilisers on average offset 60% of a specific shock to market income across 23 OECD economies. However, there are marked differences across OECD countries leaving scope to make automatic stabilisers more effective.

Richard Baldwin, 22 March 2020

“Go big. Act fast. Keep the lights on” is good advice for governments trying to flatten the epidemiological and recession curves simultaneously. This column argues that the combination of containment policies that dampen production and stimulus policies that maintain spending will generate supply-side problems. Cost-push inflation may return, political pressures for price controls and rationing may be irresistible, and governments may find themselves engaged in thinking about production and logistics of the type not undertaken since the 1940s.

Steven Hamilton, Stan Veuger, 21 March 2020

The threat posed by the pandemic cannot be addressed simply by relying on Keynesian demand stimuli. This column explores the notion of using public spending to build a bridge for businesses during this unprecedented period. The EU needs to be open to a variety of new policy measures to meet the challenge head on, perhaps even turning to Eurobonds to deal with lingering fiscal sustainability concerns going forward.

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