Eduardo Levy Yeyati, 31 March 2020

Dollar shortages and the real consequences of the COVID pandemic may lead to the next wave of emerging market debt crises. This column argues that Fed swaps mitigate this shortage only for a few selected countries, and traditional international financial institutions’ products are ill-designed to assist an emerging market facing a sudden stop. As a broker between central banks and emerging economies, the IMF has a unique opportunity to complete the international financial architecture and fill the lender of last resort role that has long eluded it.

Romesh Vaitilingam, 31 March 2020

With severe lockdowns in place across much of the world to counter the spread of the coronavirus, the IGM Forum at Chicago Booth invited its panel of leading US economists to express their views on interactions between containment measures and economic activity, and the need for public investment to support the medical response to the health emergency. This column reveals a strong consensus among the experts that abandoning lockdowns prematurely will cause greater economic damage in the longer term. There is also unanimity on the need for more US government spending on expanding treatment capacity: building temporary hospitals, accelerating testing, making more masks and ventilators, and providing financial incentives for the production of a successful vaccine.

Beatrice Weder di Mauro, Charles Wyplosz, 30 March 2020

Since the onset of the Covid outbreak, the economics profession has been extraordinarily reactive on traditional and social media. This column introduces “Covid Economics, Vetted and Real-Time Papers”, a new review from CEPR which will bring together more formal investigations, based on explicit theory and/or empirical evidence, to improve knowledge.

David Miles, 30 March 2020

In response to the current economic crisis, central banks have embarked on operations to purchase huge quantities of government bonds. Accusations that these policies amount to ‘printing money’ or ‘helicopter drops’ are unfounded and misleading. This column argues that the asset purchase operations undertaken when interest rates are very low can help greatly in stabilising the economy. These actions allow governments to issue long-term bonds, incur low effective costs in the near horizon, and avoid volatile financial markets. 

Shigeru Fujita, Giuseppe Moscarini, Fabien Postel-Vinay, 30 March 2020

The COVID-19 pandemic represents an unprecedented shock to labour markets. This column argues that the policy response should balance two objectives: (1) facilitating prompt reallocation of employment to essential activities during the emergency, and (2) maintaining workers’ attachment to their previous employers, preserving the aggregate stock of firm-specific human capital, and avoiding persistent mismatch, which would propagate the temporary shock into a prolonged stagnation. The authors make concrete labour market policy proposals and compare them with measures currently being implemented on both sides of the Atlantic.

Richard Hughes, 29 March 2020

The coronavirus outbreak requires action from governments around the world. This includes policies to protect the health of citizens and to support the economy, all while safeguarding governments’ financial stability. This column draws on experiences from past viral outbreaks to outline ten lessons for calibrating the correct policy response. Funding for health care systems should be prioritised, and targeted support for households and businesses is crucial. The rising costs and decreasing revenues for governments will also be challenging, and will likely require assistance from central banks as well as international and regional institutions. 

Lorenzo Bini Smaghi, 28 March 2020

Since the outbreak of COVID-19 in Europe, calls have been made by academics, politicians and observers to adopt Eurobonds to finance the actions needed to support economic activity. This column argues that the proposal poses two important political challenges. The first is to promote a broad transfer of economic and social competences from the national to the European level. The second is to reform the European Stability Mechanism and ensure that a sufficient number of countries apply so as to avoid stigma.

Antonio De Vito, Juan-Pedro Gomez, 29 March 2020

The coronavirus pandemic has endangered the liquidity position of not only SME firms, but also large listed firms. This column uses firm-level data from 26 countries to study how long it may take for these listed firms to become cash constrained, and what kind of interventions would be most effective. It concludes that while bridge loans would cost governments almost twice as much as a six-month tax deferral, the policy seems justified given the higher efficacy in preventing a global cash crunch. 

Daniel Gros, 28 March 2020

The increasingly draconian measures that European governments have put in place to control the spread of COVID-19 have been taken without reliable information on the true spread of the disease. This column argues that it would be possible to quickly organise an EU-wide survey test of a representative sample of the entire population using an existing panel of European households. This would yield key data on the spread of the disease, for example by showing whether suppression is still possible. Having reliable data which are comparable across countries would also be indispensable for any exit strategy from the internal border controls which have proliferated as the crisis spread.

Emanuel Ornelas, 28 March 2020

Countries worldwide are implementing lockdown measures to contain the COVID-19 pandemic. Very soon, the question will be how to lift the lockdowns while keeping the epidemic in check. This column uses basic economic principles to shed light on the key trade-offs. A central message is that there is no ‘health versus economics’ dichotomy. Rather, some degree of lockdown is typically optimal in a crisis like this, balancing economic costs against health benefits. Moreover, the optimal level of lockdown is dynamic, changing over time and eventually becoming more lenient.

Christoph Trebesch, 27 March 2020

In international crises, disasters and wars, private lenders disappear. But governments have stepped in and lent far more to each other than we previously thought. Christoph Trebesch tells Tim Phillips that new data on  200 years of official lending may contain unexpected good news for countries crippled by Covid-19.

Ethan Ilzetzki, 28 March 2020

The economic damage from the COVID-19 pandemic is already tangible. In response, fiscal and monetary policies have been introduced by many major economies. This column discusses results from a latest Centre for Macroeconomics survey on the policies best suited for dealing with the economic crisis in the UK. Broad consensus exists on the need to support households and businesses, through unemployment benefits, credit support, and direct transfers. Likewise, a substantial share of economists agree that higher public debt burdens should not be a concern in the process of supporting the economy.

Marianna Belloc, Paolo Buonanno, Francesco Drago, Roberto Galbiati, Paolo Pinotti, 28 March 2020

Italy has been hit particularly badly by the COVID-19 pandemic and has one of the highest case fatality rates. High levels of intergenerational interaction in the country have been identified as a potential contributor to this. This column cautions against drawing policy implications from simple cross-country correlation analysis. It argues instead that sound empirical analysis using detailed and harmonised microdata at the European level should be conducted to analyse the effectiveness of policy interventions. 

Charles Goodhart, Manoj Pradhan, 27 March 2020

The authorities, like most of the rest of us, have been caught short by the sudden advent of the coronavirus pandemic, and are rightly rushing to limit unnecessary deaths. But in doing so, they are imposing a massive supply shock. This column asks what will happen when the lockdown gets lifted and recovery ensues, following this period of massive fiscal and monetary expansion. It argues that we will see a surge in inflation that can only be tackled once indebtedness has been restored to viable levels.

Nicholas Bloom, Philip Bunn, Scarlet Chen, Paul Mizen, Pawel Smietanka, 27 March 2020

The spread of COVID-19 has created an important new source of concern for firms. This column reports the findings of the latest Decision Maker Panel survey of UK CFOs, which show that businesses expected the spread of the virus to have a large impact on their sales over the next year. The impacts on sales were expected to be material across all sectors, but businesses in accommodation and food, leisure and transport services expected to be most severely impacted. The survey also suggests that COVID-19 is now a more important source of uncertainty than Brexit for most UK businesses.

Andrea Galeotti, Paolo Surico, 27 March 2020

The fight against COVID-19 is lacking two important weapons: full awareness of populations (especially carriers) and knowledge of the individual traits that are most likely to identify a carrier. This column introduces a ‘user guide to COVID-19’ – a package of resources which offer a narrative of events and present the trade-offs inherent in any policy option. It also appeals for more data collection and statistical analyses.

Jon Danielsson, Robert Macrae, Dimitri Vayanos, Jean-Pierre Zigrand, 26 March 2020

Many comparisons have been made between the coronavirus crisis and the global systemic crisis in 2008. This column argues that seen through the lens of exogenous and endogenous risk, these two crises are quite different. Coronavirus is unlikely to cause a global systemic crisis, and the policy response should be different.

Eran Yashiv, 26 March 2020

The use of helicopter money has been proposed to help combat the economic repercussions of the COVID-19 pandemic. The policy has been seen as blasphemy until now, and this column presents a political economy plan to break the taboo. The creation of emergency authority for central banks and the formation of a COVID policy committee could help establish the policy as a one-off, emergency money-financed plan, giving the central bank the authority to act quickly and then revert to the ‘no money-printing’ norm as the crisis subsides.

Erik Berglöf, Jeremy Farrar, 26 March 2020

The COVID-19 pandemic is a two-pronged health and economic crisis, and requires a two-pronged response. Ahead of an extraordinary meeting of G20 Leaders, this letter signed by 20 economists and global health experts has one simple message: this crisis is global and requires unprecedented cooperation across countries and disciplines.

Richard Baldwin, 26 March 2020

The economic and medical fight against COVID-19 are linked, as Mathias Dewatripont and a team of virologist pointed out on VoxEU recently. The linchpin is testing. This column argues that testing is critical to (1) reducing the economic pain of the current COVID-19 wave, and (2) reducing the pain of the second wave that some epidemiologists are expecting. The US and Europe should be investing massively in testing capacity.

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