Jonathan D. Ostry, 30 July 2021

Jonathan Ostry of the IMF has investigated a century of pandemics and discovered that not only do they make our societies less equal, but they lead to a K-shaped recovery. He tells Tim Phillips that, unlike other crises, pandemics open a permanent gap between winners and losers.

You can download the paper that Jonathan is discussing (Furceri, D, Loungani, P, Ostry, J and Pizzuto, P. 2021. 'Will COVID-19 Have Long-Lasting Effects on Inequality? Evidence from Past Pandemics'. London, Centre for Economic Policy Research.) free here

Dennis Bonam, Andra Isabela Smădu, 18 July 2021

How did past major pandemics affect inflation dynamics? This column estimates the long-run effects of pandemics on trend inflation in Europe using historical data since the 14th century. We find that, following a pandemic event, trend inflation falls steadily below its initial level for nearly a decade. This long-run depressing effect is also observed in major individual European countries – France, Germany, Italy, the Netherlands, and the UK. The authors conclude by discussing why the effects of the COVID-19 pandemic on inflation could play out differently this time around.

Orkun Saka, Barry Eichengreen, Cevat Giray Aksoy, 09 July 2021

Although epidemics are frequently cited as inducing changes in economic behaviour and accelerating technological and behavioural trends, there may be important differences across socioeconomic groups in ability to utilise such new technologies. This column studies these issues in the context of fintech adoption and finds strong evidence of epidemic-induced changes in economic and financial behaviour, of differences in the extent of such shifts by more and less economically advantaged individuals, and of a role for IT infrastructure in spreading or limiting the benefits of technological alternatives.  The results highlight both the behavioural response to epidemics and the digital divide.

Davide Furceri, Prakash Loungani, Jonathan D. Ostry, Pietro Pizzuto, 03 June 2021

In the aftermath of past pandemics, fiscal policy played an important role in reducing or amplifying income inequality. This column predicts the likely distributional effects of Covid-19 by analysing evidence from five previous outbreaks (SARS, H1N1, MERS, Ebola, and Zika). It finds that severe austerity measures were associated with inequality increases three times greater than expansive fiscal policy following a pandemic. Premature austerity is self-defeating from both a macro and an equity standpoint.

David Bloom, Michael Kuhn, Klaus Prettner, 06 May 2021

In addition to the devastating human toll, the economic upheaval wrought by the COVID-19 pandemic illustrates the inextricable relationship between physical and economic health. This column presents an overview of the macroeconomic effects of the infectious disease epidemics of the 20th and early 21st centuries through the lens of recent COVID-19 research and explores the epidemic–economics nexus. It concludes that preventive policies, containment strategies, and early responses are more efficient, cost-effective, and manageable than combatting a full-scale infectious pandemic outbreak.

Kevin Daly, Rositsa D. Chankova, 15 April 2021

The economic consequences of Covid-19 are often compared to a war, prompting fears of rising inflation and high bond yields. However, historically, pandemics and wars have had diverging effects. This column uses data extending to the 1300s to compare inflation and government bond yield behaviour in the aftermath of the world’s 12 largest wars and pandemics. It shows that both inflation and bond yields typically rise in wartime but remain relatively stable during pandemics. Although every such event is unique, history suggests high inflation and bond yields are not a natural consequence of pandemics. 

Peter A.G. van Bergeijk, 18 March 2021

The COVID-19 pandemic is the first time in history that closing entire economies has been used as a medical tool, simultaneously and worldwide. This column argues that such ‘pandonomics’ cannot be repeated during future pandemics that are sure to come – the costs are too heavy. Since lockdowns are very costly, future economic non-pharmaceutical interventions need to be designed more intelligently, helping the economy to restructure and support the transition from a basically ignorant and domestically oriented society into a pandemic-aware one.

Charles Goodhart, Donato Masciandaro, Stefano Ugolini, 04 February 2021

‘Helicopter money’ is an often-evoked concept in macroeconomics, but the occurrence of helicopter money, strictly speaking, is exceedingly rare in history. This column describes one episode that actually provides a concrete illustration of this policy: the monetary financing of the pandemic recovery plan put in place by the Republic of Venice during the bubonic plague of 1630.

William Cook, 21 October 2020

Though it is recognized that pupils whose schooling is being disrupted by Covid-19 are suffering immediate learning loss, there exists a lack of understanding as to how this disruption might affect longer-term educational outcomes. Will Cook (Manchester Metropolitan University) examines the effect of school disruption in England due to restrictions put in place to manage the Foot and Mouth Disease epidemic in cattle in 2001 and analyzes whether primary schools that had been significantly disrupted by the epidemic experienced lower performance in standardized tests for pupils aged 11 in the year of the outbreak and in subsequent years.  He explains to Tim Phillips that, although there certainly are falls in achievement immediately after disruption,  this effect fades over subsequent years.

Natalia Fabra, Massimo Motta, Martin Peitz, 16 September 2020

The COVID-19 crisis has demonstrated the importance of preparing for pandemics and other catastrophic events that require the quick availability of some essential goods and services. Relying only on private incentives and market forces would be insufficient. Instead, governments and preferably supranational institutions should design and implement prevention, detection and mitigation measures. This requires putting in place competitive mechanisms to accumulate essential goods, establishing rationing protocols, and facilitating the ramping up of production when the crisis hits. In particular, public institutions should secure the provision of essential goods in sufficient quantity and quality at a reasonable cost. A new CEPR Policy Insight argues that the economics of electricity capacity markets provides important lessons for such a provision.

Eudora Ribeiro, 12 August 2020

Fear and imposed isolation due to COVID-19 have raised alarms about the impact on mental health on a global scale. The severe anticipated global recession and substantial increases in unemployment and indebtedness are both risk factors for suicide. This column reviews past similar scenarios of pandemics and recessions and its links to suicide. The recipe for preventing suicide amidst the COVID-19 pandemic includes investment in mental healthcare, such as providing suicide prevention services, and active employment policies.

Mehdi Shiva, 26 April 2020

Hospitals around the world are struggling to cope with large waves of COVID patients requiring attention at the same time as providing their regular services to non-COVID patients. This column describers how a failure to invest in public health and access to health care has meant that much of the world is ill-equipped to detect viral threats, protect frontline health care workers, and treat those who fall ill. More capital investment is needed to give health systems a head start for when the next pandemic strikes. 

Òscar Jordà, Sanjay R. Singh, Alan M. Taylor, 08 April 2020

The COVID-19 pandemic is having immediately visible effects on economic activity. The rapid contraction in economic activity, the collapse of trade, and the dramatic increase in the unemployment rate are without precedent. However, pandemics also have less well-understood, longer-run effects on the natural rate of interest – a critical economic barometer and policy marker. This column reveals how historical data since the 14th century on the 15 largest pandemics suggests the real natural rate could drop by close to 1.5 percentage points over the next 20 years, a decline similar to that seen since the 1980s. There are still reasons for guarded optimism about the final death toll of COVID-19 and thus its ultimate economic impact. Perhaps this time may be different.

Rémi Jedwab, Noel Johnson, Mark Koyama, 08 May 2019

The Black Death killed 40% of Europe’s population between 1347 and 1352, but little is known about its spatial effects. The column uses variation in Plague mortality at the city level to explore the short-run and long-run impacts on city growth. After less than 200 years the impact of Black Death mortality in cities was close to zero, but the rate of urban recovery depended on advantages that favoured trade.

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