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.

Lars Jonung, 18 June 2020

The Swedish policy response to Covid-19 is exceptional by international comparison. This column explains how the approach is decided by three articles in the Swedish constitution. The first guarantees the freedom of movement for Swedish citizens, ruling out nationwide lockdowns. The second establishes unique independence for public agencies, allowing them to design the policy response to the pandemic. The third grants exceptional powers to local government. In addition, the Swedish approach is fostered by strong trust in the government.

Paul De Grauwe, Sebastian Diessner, 18 June 2020

There is growing acceptance that some form of monetary finance is needed, if not inevitable, in light of the severity of the downturn in the euro area. This column argues that while a monetisation of the deficits induced by the COVID-19 crisis would eventually increase the price level so that, after a return to economic normalcy, inflation would rise for a couple of years, this is a price worth paying to avoid future sovereign debt crises in the euro area. Moreover, the ECB, as the most independent central bank in the world, would be well equipped to prevent the inflationary upsurge from becoming permanent.

Pragyan Deb, Davide Furceri, Jonathan D. Ostry, Nour Tawk, 17 June 2020

Containment measures to halt the spread of the 2019 coronavirus pandemic entail large short-term economic costs. This column attempts to quantify these effects using daily global data on real-time containment measures and daily indicators of economic activity. Over a 30-day period from implementation, containment measures have, on average, led to a loss of about 15% in industrial production. Macroeconomic policy measures have however mitigated some of these economic costs. Stay-at-home requirements and workplace closures are most effective in curbing both infections and deaths but are also associated with the largest economic costs.

Juan C. Palomino, Juan Gabriel Rodríguez, Raquel Sebastian, 16 June 2020

Enforced social distancing and lockdown measures to contain COVID-19 restrict economic activity, especially among workers in non-essential jobs who cannot ‘telework’. These have implications for inequality and poverty. This column analyses the capacity of individuals in 29 European countries to work under lockdown and the potential impact of a two-month lockdown on wages and inequality levels. There will be substantial and uneven wage losses across the board and poverty will rise. Inequality within countries will worsen, as it will between countries although to a lesser extent.

Simon Burgess, 16 June 2020

As policy attention in countries around Europe shifts to mitigating the longer-run impacts of the COVID-19 pandemic, a central concern will be to prevent this one-off event from permanently blighting the life chances of the millions of children who missed weeks of school due to the lockdown. Focusing on the UK, this column suggests a way to repair some of the educational damage using small group tutoring, a method with widely proven effectiveness, at a modest cost, and on a rapid but feasible timescale.

Roel Beetsma, George Kopits, 15 June 2020

Cevat Giray Aksoy, Barry Eichengreen, Orkun Saka, 15 June 2020

What will be the political legacy of the COVID-19 pandemic? This column uses data from the 2006-2018 Gallup World Polls to show that epidemic exposure during an individual’s ‘impressionable years’ of 18 to 25 has a persistent negative effect on trust in political institutions and leaders, especially in democracies. Combined with other evidence that trust is important for limiting the spread of infection, this raises the spectre of a circular, self-reinforcing spiral in which poor public health policy leads to deeper distrust, further undermining the effectiveness of public health policy.

Sylvain Leduc, Zheng Liu, 14 June 2020

The COVID-19 pandemic has raised concerns about the future of work. The pandemic may become recurrent and necessitate repeated adoptions of social distancing measures, creating substantial uncertainty about worker productivity. This column presents a theoretical framework suggesting that such job uncertainty reduces aggregate demand, and dampens business investment in general. However, automation may provide one way for businesses to cope with the uncertainty about worker productivity. It appears that pandemic-induced job uncertainty could stimulate automation investment, despite declines in aggregate demand.

Fernando Leibovici, Ana Maria Santacreu, 14 June 2020

The ongoing COVID-19 pandemic has led to a massive increase in the demand for essential medical equipment. This column discusses recent findings on the role of international trade of essential medical goods in exacerbating or mitigating the impact of a pandemic. The effects depend crucially on the countries’ trade imbalances in essential medical goods. Net importers of these goods are relatively worse off during a pandemic than net exporters. Although the welfare losses of net importers are lower in a world with high trade barriers, they benefit from reducing barriers once the pandemic arrives.

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