Mathias Dewatripont, Michel Goldman, Eric Muraille, Jean-Philippe Platteau, 23 March 2020

The first phase of the economic response to the COVID-19 pandemic is already under way with measures that, while costly, are relatively ‘easy’. The second phase – restarting the economy – involves the more challenging task of overcoming people’s fears of contracting the virus from a co-worker. This column describes how a combination of two currently available tests could identify people who are both free from COVID-19 and immune to it, and thus are safe to go back to work. A targeted scaling-up of procedures for both tests will help maintain vital services and accelerate the relaunch of the economy, while minimising the risk of the epidemic recurring after restrictions are lifted.

Yi Huang, Chen Lin, Pengfei Wang, Zhiwei Xu, 23 March 2020

With the COVID-19 outbreak having officially become a pandemic, it is essential to consider not just how to prevent further public health crises but also economic and financial crises. This column suggests that in both cases, recent lessons from China are instructive. China enacted aggressive public health policies that appear to have been effective, at least in the short term. But the measures taken to stem the public health crisis may still lead to a domestic economic meltdown that could infect international trade.

Niels Joachim Gormsen, Ralph Koijen, 23 March 2020

The economic effects of the coronavirus outbreak, and the preventive measures adopted around the world, are still largely unknown. In addition, standard macroeconomic models based on fundamentals may be slow to adapt in this fast-changing environment. This column uses high-frequency data on dividend futures to evaluate the impact on growth expectations. Dividend growth and GDP growth expectations in the US and EU begin to deteriorate after the lockdown in Italy, and these effects are exacerbated by the travel restrictions imposed thereafter. The lower bound on dividend growth is as severe as during the Global Crisis, at least in the short run.

Bo Becker, Ulrich Hege, Pierre Mella-Barral, 21 March 2020

The coronavirus pandemic is likely to lead to a steep, and potentially protracted, economic downturn. In response, many countries have implemented ambitious packages to support households and businesses. This column argues that in light of already elevated debt burdens, provisions for future debt restructuring should be made as soon as possible. These include carefully designed bailout packages, speedier in-court insolvency proceedings, and a stronger role of the state in dealing with renegotiations. Failure to plan and prepare for these cases could lead to a much slower economic recovery.

Steven Hamilton, Stan Veuger, 21 March 2020

The threat posed by the pandemic cannot be addressed simply by relying on Keynesian demand stimuli. This column explores the notion of using public spending to build a bridge for businesses during this unprecedented period. The EU needs to be open to a variety of new policy measures to meet the challenge head on, perhaps even turning to Eurobonds to deal with lingering fiscal sustainability concerns going forward.

Thiemo Fetzer, Lukas Hensel, Johannes Hermle, Chris Roth, 21 March 2020

There is a risk that economic anxiety over the coronavirus crisis will fuel a long-term economic downturn. This column uses Google search activity and individual survey data to document a rapid increase in economic anxiety in the US in response to the initial global spreading of the virus. Survey respondents tended to overestimate the mortality and contagiousness of COVID-19, but underestimated the non-linear nature of how infectious diseases spread. This suggests that information and public education may play a central role in containment and in managing the negative economic impact of increased economic anxiety.

Luis Garicano, 20 March 2020

Faced with a huge increase in the number of COVID-19 cases, by now all EU governments have undertaken strategies of varying degrees to ‘flatten the curve’ – to reduce the rate of growth of the pandemic in order to avoid a collapse of European healthcare systems. This column, taken from the recent Vox eBook, proposes a €500 billion ‘bazooka’ to fight the virus, stabilise the European economy, and protect its jobs while the economy is in the ‘freezer’. It also discusses how to finance this package. 

Christian Bayer, Moritz Kuhn, 20 March 2020

There are large differences in case fatality rates from the coronavirus outbreak across countries, from around 6% in Italy to close to zero in some northern European countries (as of 12 March). This column uses World Value Survey data on the share of people aged 30-49 who live with their parents to show that fatality rates are initially higher in countries with more intergenerational interactions. It provides a warning for how important it is for countries where the elderly and the young live close together in particular to try to contain the virus early on.

Robert Barro, Jose Ursua, Joanna Weng, 20 March 2020

What is a plausible worst-case scenario for outcomes under COVID-19? This column draws lessons from the 1918-1920 Great Influenza Pandemic. Data for 43 countries imply flu-related deaths back then of 39 million, 2% of the world population, implying 150 million deaths when applied to current population. Controlling for effects from WWI, GDP and consumption in the typical country declined by 6% and 8%, respectively, while real returns on stocks and short-term government bills fell meaningfully. Large potential losses in lives and economic activity justify current policy actions to limit the damage, but there is a difficult tradeoff between mortality and lost output, and this tradeoff warrants discussion that is absent so far.

Sebastian Horn, Carmen Reinhart, Christoph Trebesch, 20 March 2020

The world is coping with a global disaster, as the new Coronavirus takes a toll on many lost lives and a severe impact on economic activity. To provide a long-run perspective, this column documents the international response to a variety of disasters since 1790. Based on a new comprehensive database on loans extended by governments and central banks, official (sovereign-to-sovereign) international lending is much larger than generally known. Official lending spikes in times of global turmoil, such as wars, financial crises or natural disasters. Indeed, in these periods, official capital flows have repeatedly surpassed total private capital flows in the past two centuries. Wars, in particular, were accompanied by large surges in the volume of official cross-border lending.

Bartosz Maćkowiak, Mirko Wiederholt, 19 March 2020

Economists may not have been able to do much about the outbreak of the coronavirus, but this column argues that economics can help tackle the problem at its source by reducing the spread of the virus. Using a theory of decision-making by agents who have limited information-processing ability, it offers various recommendations for individuals and policymakers to limit the spread of COVID-19.

Simon Evenett, 19 March 2020

Given the centrality of China to many international supply chains, there is considerable interest in the impact of COVID-19 on global trade flows. And a troubling trade policy dimension is now coming to light. This column reports on and assesses a finding of the Global Trade Alert that 24 nations have recently imposed export restrictions on medical supplies.

Claudia Biancotti, Alessandro Borin, Federico Cingano, Pietro Tommasino, Giovanni Veronese, 18 March 2020

Governments around the world are tackling the COVID-19 pandemic from different angles. This column, by members of the Bank of Italy’s COVID-19 monitoring group, argues that in the absence of coordinated containment measures, the most likely outcome is the worst of both worlds: preventable loss of lives and of GDP. Predictability and consistency in policy responses across space and time is key, both in the public health and economic domains. Effective cooperation in avoiding a 'common bad' might be able to endow the world with the crucial common good of a more complete and effective governance. The European Union should be the first to set an example.

Jordi Galí, 17 March 2020

The measures many countries are taking to contain the spread of coronavirus, while necessary, are bound to have a direct impact on the economy. This column argues that rather than raising taxes and/or increasing government debt to finance the necessary fiscal programmes, the time has come for ‘helicopter money’ – direct, unrepayable funding by the central bank of the additional fiscal transfers deemed necessary.

Group of concerned economists, 16 March 2020

The COVID-19 pandemic is an extreme event that threatens the health and economic wellbeing of populations across the globe. This manifesto from a group of Portuguese economists calls for urgent action from the EU to prevent the suffering of its people and to save itself and the democratic values it stands for. A large-scale emergency programme requires massive emergency funding, and in the face of extraordinary circumstances, the ECB must be allowed to finance such a programme.

Romesh Vaitilingam, 14 March 2020

As tumbling stock markets indicated growing fears about the potential economic impact of the coronavirus, the IGM Forum at Chicago Booth invited its panels of leading economists in the US and Europe to express their views on the likelihood of a major recession. This column reveals a broad consensus across the experts that there will be a sharp downturn in the economy, but less agreement on how prolonged the dip is likely to be. Asked about the relative importance of supply and demand shocks damaging the economy, reactions were more mixed. But over two-thirds of the European economists are highly doubtful of the readiness of the economic policy institutions of the euro area to respond effectively to the potential damage from COVID-19.

Henrik Müller, 14 March 2020

The coronavirus crisis is hitting economies hard. This column argues that policymakers risk doing too little too late – and creating plenty of confusion on the way. It also suggests some lessons that can be learnt from the response to the last crisis.

Richard Baldwin, 12 March 2020

The spread of COVID-19 is not going to follow an exponential curve – and grave errors will follow if analysts believe it will. The number of new cases rises rapidly, peaks, and then declines. It’s called the epidemiological curve. It’s not a theory or hypothesis; it plays out that way every flu season. It is how it has played out in China and Korea for COVID-19. Flattening the peak to avoid overloading the healthcare system is the main medical goal of the seemingly extreme containment policies we have seen to date.

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