Kilian Rieder, 20 April 2020

Since mid-March 2020, countries have seen consumers panic buying large quantities of groceries in reaction to the COVID-19 pandemic. Why does panic buying arise and how may one mitigate its negative consequences? This column examines the Bank of England’s response to financial crises during the 19th century and suggests that a key action is to counter those incentives that turn panic buying into a rational strategy.

Titan Alon, Matthias Doepke, Jane Olmstead-Rumsey, Michèle Tertilt, 19 April 2020

The lockdowns triggered by COVID-19 are taking a disproportionate toll on women in the labour market, as the sectors with high rates of female employment are experiencing heavier job losses while increased childcare needs during school closures exert an outsized impact on working mothers. Still, this column finds reason to hope that by promoting flexible work arrangements and putting the childcare obligations of both genders into plain sight, the crisis may reduce labour-market barriers in the long run.  

Massimo Motta, Martin Peitz, 18 April 2020

State aid is essential to reduce long-run harm to the EU economy as a result of the Covid-19 crisis. However, non-harmonised programmes across EU member states generate serious risks to the functioning of markets, particularly if they go beyond short-term liquidity provision or employment support. This column suggests imposing strict conditions on state aid for recapitalisation of firms and argues in favour of an EU-wide programme for critical sectors. Such a programme would prevent harmful market distortions and maintain a level playing field for EU companies.

Simona Bignami-Van Assche, Daniela Ghio, Ari Van Assche, 17 April 2020

It is well understood that COVID-19 severity varies with age. However, little consideration has been given to the differential trend of infections across age groups. By drawing from the Italian experience, this column shows how the effectiveness of strategies to ‘flatten the curve’ of COVID-19 infections crucially depends on workforce demographics. It suggests that restricting the age of essential workers may be useful to mitigate the work–security trade-off while keeping the economy going.

Ethan Ilzetzki, Hugo Reichardt, 17 April 2020

Countries worldwide are scrambling to procure medical supplies in response to the COVID-19 pandemic. Several governments have called on non-specialist firms to produce medical ventilators. This column draws three lessons from US munition production in WWII. First, ramping up production takes time, particularly for non-specialist producers. Second, international cooperation is needed to share knowledge on production technology and supply chains. Third, direct public investment in plant expansions should be part of the strategy.

Hiroyasu Inoue, Yasuyuki Todo, 16 April 2020

Cities and regions around the world are in lockdown in an attempt to contain the spread of Covid-19. This column examines how the economic effect of the lockdown of a city can propagate to other regions in the country, focusing on the case of Tokyo. The findings suggest that if Tokyo were to be locked down for two weeks, the loss in value added production in the city would be 4.3 trillion yen, while the production loss in the rest of Japan due to propagation through supply chains would be 5 trillion yen. In addition, the effect on other regions becomes progressively larger as the duration of the lockdown grows.

Ruben Durante, Luigi Guiso, Giorgio Gulino, 16 April 2020

Social distancing slows the spread of COVID-19. In regions that adopt social distancing practices early (i.e. before receiving explicit stay-at-home guidelines from their governments), the virus can be contained more quickly. Using Italian data from phone location tracking of movements made by individuals after the pandemic began, this column finds sharper drops in mobility in areas with higher ‘civic capital’, suggesting that civic values can mediate the social distancing process.

Filippo di Mauro, Chad Syverson, 16 April 2020

The world went into the COVID crisis in the midst of a 15-year-long productivity growth slowdown. This column considers the channels through which the crisis might shift the growth rates of productivity and output. Globalisation, labour mobility and small firms may all fall victim to the crisis if the world does not succeed in reopening borders, refraining from trade and currency wars and focusing on policies to boost productivity. On the upside, the broad adoption of new technologies – such as IT skills during the epidemic – and strong reallocation pressures may provide an independent boost on productivity as we come out of the crisis.

Eduardo Levy Yeyati, Luca Sartorio, 16 April 2020

The policy tools being used to stabilise incomes during the COVID-19 lockdowns will provide job and payment protection for formal, salaried workers. But in the developing world, these workers account for only half of the labour force. This column looks at the other half: the ‘independent’ workers who have not only seen their incomes reduced, but who possess few of the benefits tied to jobs – from reliable hours to severance pay and social security. If disparities in labour markets go unaddressed, the pandemic will deepen the toll on poverty and inequality.

Romina Gambacorta, Alfonso Rosolia, Francesca Zanichelli, 15 April 2020

Household incomes are bound to be severely hit by the lockdowns imposed across the world in response to the COVID-19 pandemic. This column uses survey data on European households’ balance sheets to demonstrate that across European countries there are large (and similar) shares of the population that are likely to suffer from the economic fallout of containment measures – albeit through different channels – and that, were the lockdowns to last three months, might not have sufficient financial resources to maintain a minimum threshold of wellbeing.

Vesa Vihriälä, 15 April 2020

The high level of public debt in the euro area and doubts over debt sustainability in some member states mean that the fiscal expansion necessary to counter the Covid crisis will be challenging. This column argues for debt relief by the ECB that would allow all member states to finance the necessary fiscal measures in a normal fashion. While effectively forgiving past debt would create expectations that the same could happen again in the future, this moral hazard should be weighed against what is likely to happen without such relief. 

Olivier Coibion, Yuriy Gorodnichenko, Michael Weber, 14 April 2020

The Covid-19 crisis in the US and the policy responses have led to unprecedented numbers of initial claims for unemployment, but there are concerns that total job losses are being understated. This column uses a repeated large-scale survey of households in the Nielsen Homescan panel to show that job loss has been significantly greater than implied by new unemployment claims, with an estimated 20 million jobs lost by 8 April – far more than were lost over the entire Great Recession. Many of those who have lost their jobs are not actively looking to find new ones.

Sebastian Horn, Josefin Meyer, Christoph Trebesch, 15 April 2020

The introduction of European Coronabonds is sometimes described as an unprecedented step that would create a dangerous precedent of debt mutualisation. This column shows that this view is wrong and ignores the history of European financial cooperation. Since the 1970s, the European Commission has placed more than a dozen community bonds on private markets, which were guaranteed by the member states and distributed to countries in crisis. These bonds have been fully repaid in the past. Coronabonds with joint and several liability go a step further, but they would stand in a long tradition of European financial solidarity and cooperation.

Jonas Jessen, Sevrin Waights, 14 April 2020

The COVID-19 outbreak has forced schools and day care centres to close their doors. In response, many parents are now juggling housework and paid work with a sudden increase in child care responsibilities. To understand how parents might reallocate their time in the current situation (for which we do not yet have data), this column uses evidence from a 2012-2013 study of parents in Germany, and compares the time diaries of those whose youngest child had a place in day care to those whose youngest child remained at home. 

Tobias Krahnke, 14 April 2020

Fears of a next wave of emerging market debt crises recently sparked a renewed debate about the adequacy of IMF resources and its toolkit. This column argues that the issue is not whether the IMF has sufficient resources for large-scale financial assistance to all of its members in need, but that such assistance would ultimately be counterproductive and could, in fact, exacerbate the risk of liquidity crises morphing into solvency crises. One of the reasons is that large-scale IMF financial assistance coupled with the IMF’s preferred creditor status can lead to a crowding-out of private investors by increasing their expected loss in the event of default. This underlines the need for all elements of the international monetary and financial system to assume their full responsibility, including the private sector.

Tobias Hartl, Klaus Wälde, Enzo Weber, 14 April 2020

Containment measures have been in place in Germany since the middle of March in response to the COVID-19 pandemic. This column examines the impact of these measures on the spread of the virus. It finds a reduction in the growth rate of COVID-19 seven days after the implementation of the policies on 13 March and again eight days after the implementation of further measures on 22 March. 

Richard Baldwin, 13 April 2020

Governments are thinking about ways to exit the COVID containment policies currently in place. While ‘exit’ is too optimistic of a word, the necessity is clear. This column argues that we should not think of this as a ‘dollars versus deaths’ trade-off, but rather as a constrained optimisation with two conflicting imperatives: keeping containment stringent enough to achieve the medical imperative, but lax enough to avoid overstretching citizens’ tolerance. Remobilising the workforce is a key element of the latter. This column uses the two-constraints approach that I introduced last week to think ahead about the various exit strategies.

Mark Cliffe, 13 April 2020

The Covid-19 pandemic is not yet under control. But is already clear that when it is over, policymakers will face a transformed landscape. Even radical new interventions will not prevent structural economic damage, and the combination of divisive nationalism, increased risk aversion and the need to build resilience will weigh on economic growth. But resilience will also call for accelerated use of digital technology and harnessing societal pressure for more sustainable and social approaches will present opportunities for smarter, more far-sighted governments and institutions.

Katharina Janke, Kevin Lee, Carol Propper, Kalvinder Shields, Michael A Shields, 13 April 2020

The impact of COVID-19 on the economy will affect not just people’s incomes but also their health. This column examines the effect of this economic downturn on the incidence of long-term chronic ill health in the UK. Such conditions affect one in three people of working age. The findings suggest that the economic downturn could result in around 900,000 more people of working age developing a long-term chronic condition. The impact will be worse in areas that already have higher unemployment. 

Scott Baker, Nicholas Bloom, Steven Davis, Stephen Terry, 13 April 2020

While assessing the economic impact of COVID-19 is essential, it is challenging due to the extreme speed with which the crisis unfolded. This column uses three forward-looking uncertainty measures to quantify the enormous increase in economic uncertainty over the past weeks. Feeding these COVID-induced uncertainty shocks into a model of disaster effects predicts a year-on-year contraction in US real GDP of nearly 11% as of 2020 Q4.  About 60% of the forecasted output contraction is estimated to be due to COVID-induced uncertainty. 

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