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.

Anniek de Ruijter, Roel Beetsma, Brian Burgoon, Francesco Nicoli, Frank Vandenbroucke, 26 March 2020

An initiative to create centralised control of medical countermeasures at the EU level would solve many coordination issues in times of crisis. However, a unified European response faces a number of legal and political obstacles. This column uses a survey conducted before the COVID-19 outbreak to understand EU citizens’ attitudes towards a joint solidarity programme. It suggests considerable support already exists for an effective policy framework centralising the procurement, stockpiling, and allocation of medicines. 

Lorenzo Codogno, Paul van den Noord, 25 March 2020

The COVID-19 outbreak that is hitting the euro area economy needs to be met by a powerful policy response beyond the emergency measures already in place. This column uses an empirically calibrated model to show that the creation of a safe asset and fiscal capacity at the centre – on which the debate has been ongoing for a long while – would be a powerful means to mitigate the economic impact of the crisis.

Andrea Ichino, Giacomo Calzolari, Andrea Mattozzi, Aldo Rustichini, Giulio Zanella, Massimo Anelli, 25 March 2020

The world economy cannot survive the current social distancing for more than a few weeks. This column proposes a viable strategy to address the joint health and economic crisis caused by COVID-19, which involves gradually sending the young who face the lowest risks back to work on a voluntary basis. This should happen as soon as the congestion of healthcare systems is less critical, but while a large fraction of the population is not yet immune. All of these workers in centrally relevant sectors must be temporarily separated from the old and the immunocompromised. They must also be frequently tested for COVID-19 and for subsequent immunity as well as monitored to immediately trace the contagion they may induce or receive.

Aitor Erce, Antonio Garcia Pascual, Toni Roldán Monés, 25 March 2020

The amount of financial resources needed to fight the COVID-19 is so large that most euro area member states will need a backstop from Europe. This column discusses how to use the European Stability Mechanism toolbox to finance the fight, using Spain as an example. It shows that an ESM loan with low margins and a smoothed repayment schedule would stabilise debt stocks and gross financing needs, and that ESM financing could help Spain save around €150 billion in interest payments between 2020 and 2030. A combination of bold ESM and ECB support could reinforce Spain’s debt sustainability after the COVID-19 shock, and could do the same for other member states. 

Anabel González, 25 March 2020

As countries deploy all instruments to combat the COVID-19 pandemic, this column reminds trade ministers around the world that trade can serve as a powerful, low-cost tool to improve access to medical supplies. It offers various recommendations for immediate action, all of them compatible with WTO rules.

Joan Monras, 25 March 2020

While the world is waiting for a vaccine that helps defeat COVID-19, many countries have constrained mobility considerably to try to curb the expansion of the virus. However, such ‘social distancing’ comes with large economic costs. Based on recent evidence on commuting flows and local consumption patterns, this column proposes ways to think about social distancing policies that may be effective and, at the same time, limit the negative consequences for the economy. 

Ignazio Angeloni, 24 March 2020

Banks are the key to providing financial oxygen to the economy, but the coronavirus pandemic is raising the risk that banks in the euro area will cease to function. This column argues that the return to normality we all crave requires, among other things, that banks be saved, and that this will not happen unless regulation is adapted and more public support is provided.

Arnoud Boot, Elena Carletti, Hans‐Helmut Kotz, Jan Pieter Krahnen, Loriana Pelizzon, Marti Subrahmanyam, 25 March 2020

The COVID-19 pandemic has massive detrimental economic effects and demands immediate policy actions to prevent a financial or debt crisis. This column argues that while the fiscal policy responses in Europe have some merit in the short term, they put financial stability in the longer run at risk. It calls for a coordinated long-term fiscal plan at the pan-European level to complement national measures. 

Arnoud Boot, Elena Carletti, Rainer Haselmann, Hans‐Helmut Kotz, Jan Pieter Krahnen, Loriana Pelizzon, Stephen Schaefer, Marti Subrahmanyam, 24 March 2020

Francesco Giavazzi, Guido Tabellini, 24 March 2020

This war-like shock will require very large fiscal support. Its financing cost should be distributed over several generations. This can be achieved by issuing irredeemable or very long maturity Eurobonds. They should be backed by the ECB to keep the financing burden low. This column argues that no institutional or legal constraints prevent this policy response. Prompt action is critical since allowing one crisis to morph into many could disrupt the European project, with far-reaching and unpredictable political implications. 

Thomas Drechsel, Sebnem Kalemli-Ozcan, 24 March 2020

Strong policy interventions are required to support the economy during the COVID-19 pandemic. This column provides estimates on the costs and effects of a negative lump-sum tax for US SMEs based on firms’ payrolls. A policy covering the payroll for all firms with fewer than 500 employees for three months could benefit 61 million workers in the US at a cost of 3% of GDP.

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