Filippo di Mauro, 10 July 2020

In the recovery from Covid-19 we urgently need to boost productivity. But which policies move the needle? Filippo di Mauro tells Tim Phillips about what CompNet's firm-level productivity data tells us about both the problem and the solution.

Biagio Bossone, Harish Natarajan, 13 July 2020

Governments and economists are now focused on the macroeconomic policies that can support economies during the Covid-19 pandemic. Yet, for policies to be effective and economies to function, payment and settlement systems and services – collectively referred to as the National Payments System – must operate efficiently, reliably, and securely. The first column of this series identifies the challenges affecting payment services during emergencies and discusses measures to ensure that payment systems keep operating. Public authorities should be proactive in mitigating risks to payment systems to support economic activity and help the public.

Christos Makridis, Jonathan Rothwell, 10 July 2020

There is significant dispersion in beliefs about the pandemic and its economic implications. This column uses new high-frequency and nationally representative data to document the overwhelming importance of political affiliation as a determinant of these beliefs and the adverse effects of partisanship on local economic activity. In the US, Republicans are significantly less worried about COVID-19 and less likely to expect a long-term disruption due to the virus. These results suggest that the macroeconomic effects of the pandemic on consumption may depend on behavioural factors, like political affiliation.

Paolo Falco, Sarah Zaccagni, 09 July 2020

Reminders to encourage social distancing have been used widely by the authorities around the world during the crisis. Based on a randomised controlled trial conducted in Denmark, this column shows what types of messages are most (and least) effective in convincing people to stay home. People’s good intentions often do not translate into the desired actions. Reminders significantly increase compliance with social distancing among people in poor health who face the greatest risks.

Chen Chen, Sudipto Dasgupta, Thanh Huynh, Ying Xia, 08 July 2020

Stay-at-home orders, when effective, can save both lives and the economy. Even though the short-term economic impact is very significant, not getting the pandemic under control can impose even higher economic costs in the future. This column studies the market reactions following staggered lockdown events across US states during Covid-19. It finds that returns on firms located in lockdown states are higher following the lockdown. These reactions can be interpreted as reflecting updated beliefs of market participants in the light of events that follow the lockdowns, such as compliance with stay-at-home orders.

Nicolas Gonne, Olivier Hubert, 08 July 2020

The shutdown of passenger air travel at the height of the COVID-19 pandemic slowed the spread of the disease but caused major economic losses for the sector. This column presents a cost-benefit analysis of the global freeze of passenger air traffic. While any conclusion is highly dependent on a handful of factors, including the controversial and difficult-to-calculate ‘value of a statistical life’, the simulations provide useful anchoring points at a time when governments are contemplating reopening air routes, as well as in the face of a potential second wave of infections.

Jean-Pierre Dube, Andrey Simonov, Szymon Sacher, Shirsho Biswas, 06 July 2020

US televised news networks offer strikingly different coverage of the COVID-19 pandemic, the exposure risks, and the benefits of social distancing measures recommended by health experts. This column devises an empirical strategy to test for a causal effect of news viewership on compliance with social distancing. It finds a large effect of local Fox News viewership on local compliance, with a persuasion rate of up to 26%. These findings reinforce concerns about the media’s role in sowing distrust in scientific evidence in the determination of public policies.  

Willem Buiter, 03 July 2020

The US Federal Reserve – the world’s most important central bank – is not in a good place. This column outlines three flaws in the operating practices of the Fed – (i) its refusal to adopt negative policy rates, (ii) the build-up of significant credit risks through non-transparent (quasi-)fiscal actions, and (iii) stress testing analysis which fails to account for the severity of the COVID-19 crisis. It proposes a number of ways forward, including a symmetric policy rate around zero, a temporary ban on dividend payments, new equity issuance, and conducting a comprehensive stress test of the financial system.

Luan Borelli, Geraldo Goes, 01 July 2020

Brazil has faced great difficulties in controlling the COVID-19 epidemic, having become the world’s epicentre of the coronavirus pandemic and recently reaching 50,000 fatalities. This column argues that the great heterogeneities between states in Brazil, together with difficulties in political coordination, may have shaped these consequences. Looking at five states, it investigates whether certain differences in the states’ intrinsic characteristics may have influenced the dynamics of the local epidemic. Governments may need to consider local conditions and adopt heterogeneous containment policies.

Gianluca Benigno, Jon Hartley, Alicia García-Herrero, Alessandro Rebucci, Elina Ribakova, 29 June 2020

Emerging economies are fighting COVID-19 and the economic sudden stop imposed by the containment and lockdown policies, in the same way as advanced economies. However, emerging markets also face large and rapid capital outflows as a result of the pandemic. This column argues that credible emerging market central banks could rely on purchases of local currency government bonds to support the needed health and welfare expenditures and fiscal stimulus. In countries with flexible exchange rate regimes and well-anchored inflation expectations, such quantitative easing would help ease financial conditions, while minimising the risks of large depreciations and spiralling inflation. 

Caitlin Brown, Martin Ravallion, Dominique van de Walle, 27 June 2020

Recommendations to limit the spread of COVID-19 call for social distancing, washing, and access to information and treatment. However, people need to be in household environments that allow them to follow those recommendations. This column examines the relationship between poverty and the adequacy of the home environment. There is a strong wealth effect both within and between countries, where the poor are less likely to have the kind of dwellings and infrastructure to follow WHO recommendations. Complementary policies to address such inadequate home environments are needed.

Christian Bredemeier, Falko Juessen, Roland Winkler, 28 June 2020

The COVID-19 crisis has disproportionately affected different occupations in the labour market. Workers in contact-intensive and personal-service oriented sectors bear the brunt of the COVID-19 recession, but blue-collar workers suffer heavy job losses as well. This column uses a multi-sector, multi-occupation macroeconomic model to study how different fiscal stimulus measures can boost aggregate demand and help the economy recover faster. It finds that a cut in taxes on labour income outperforms other stimulus plans in promoting job creation for those who lost their jobs in the COVID-19 downturn.

Toshihiro Okubo, 25 June 2020

The Japanese government’s policy response to the COVID-19 pandemic was to ask people to refrain from leaving their homes and to encourage teleworking. This column examines the effect of COVID-19 on the uptake of teleworking in a country that has the lowest use among developed countries. Overall, teleworking increased about 4 percentage points from January to March 2020, driven by industries and occupations related to information and located in the Tokyo metropolitan area. Teleworking is not suited to face-to-face services and manual labour, which saw substantial declines in worker incomes.

David Bloom, Klaus Prettner, 25 June 2020

Over the last decade there has been a tremendous progress in automation. Many tasks previously seen as un-automatable can now be performed without human labour, and the number of industrial robots in use has increased sharply. This column describes the recent trends in automation and argues that its principal effects are to increase output per capita at the expense of rising inequality. Advancing technologies have mainly replaced the routine tasks of low-skilled workers, while the incomes robots generate flow to wealthier capital owners. The current COVID-19 pandemic is likely to reinforce these trends, raising the need for a policy response.

Simeon Djankov, Ugo Panizza, 22 June 2020

At the beginning of the COVID-19 pandemic, it was hoped that warm weather and younger populations would shield many developing countries from the virus. This hope has not been in realised. Infected cases in Africa, South Asia and Latin America are still growing, with Latin America having surpassed the number of cases in Europe and growing rapidly. This column introduces a new eBook that describes the early work focusing on developing and emerging markets. It concludes that the international community should step up, by providing aid, technical assistance and debt relief so that countries will not need to decide between saving lives and servicing their debts.

Eiji Yamamura, Yoshiro Tsutsui, 22 June 2020

Japan has had relatively few victims of COVID-19, even though the Japanese government has adopted more modest measures than other nations. Nonetheless, the pandemic has been a substantial strain on citizens' mental health, which may have triggered rises in domestic violence. This column presents evidence from various Japanese prefectures, focusing on people’s mental wellbeing before and after the state of emergency was declared. Results indicate that the announcement led citizens to take preventive steps, but caused them to experience certain heightened emotions. Crucially, the importance of mental healthcare should not be overlooked as an additional policy consideration.  

Timo Mitze, Reinhold Kosfeld, Johannes Rode, Klaus Wälde, 22 June 2020

Confronted with a novel, aggressive coronavirus, Germany implemented measures to reduce its spread since March 2020. Requiring people to wear face masks in public places has, however, been a subject of controversy and isolating the effect of mask-wearing on the spread of COVID-19 is not simple. This column looks at the town of Jena and other German regions that introduced face masks before the rest of the country to see whether the requirement makes a difference in the number of new COVID-19 cases. Requiring face masks to be worn decreases the growth rate of COVID-19 cases by about 40% in Germany.

Robert Gilhooly, Carolina Martinez, Abigail Watt, 22 June 2020

China has implemented a wide range of measures to support the economy through the ongoing coronavirus shock. This column examines China’s policy response, and suggests that the recent loosening in financial conditions should support activity over the next six to nine months, but it will only be at best half that seen in 2016 and a third of that after the Global Crisis given the relative change in financial conditions thus far. Moreover, the policy levers are at best only 40% of that deployed during the Global Crisis. This contrasts with the approach of many other countries, which have reacted more aggressively to the coronavirus shock. 

Olivier Coibion, Yuriy Gorodnichenko, Michael Weber, 19 June 2020

The COVID-19 pandemic has resulted in some of the largest monetary and fiscal policy responses around the world. This column uses a large-scale survey of US households during the pandemic to study how new information about the coronavirus and associated policy responses affect households’ expectations. It finds that such information treatments have little effect on both households’ economic beliefs and future spending plans. This result is a fundamental challenge to workhorse models used by macroeconomists in which the rapid and endogenous adjustment of household expectations is a key driver of macroeconomic outcomes.

Alina Kristin Bartscher, Sebastian Seitz, Sebastian Siegloch, Michaela Slotwinski, Nils Wehrhöfer, 18 June 2020

In the absence of viable medical responses to combat the ongoing Covid-19 pandemic, policymakers have appealed to the social responsibility of their citizens to comply with social distancing rules. This column explores how regional differences in social capital can affect the spread of Covid-19, focusing on seven European countries. The results suggest that areas with high social capital registered between 12% and 32% fewer Covid-19 cases from mid-March until mid-May. A case study of Italy validates the independent role of social capital, showing a consistent reduction in excess deaths and documenting a reduction in mobility prior to the lockdown as a mediating channel.

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