Ethan Ilzetzki, 11 June 2020

Public debt has risen to unprecedented peacetime levels, due to policies put into place to address the economic fallout from COVID-19. Nevertheless, as this column reveals, the Centre for Macroeconomics panel was nearly unanimous that the Treasury should not take any action to decrease the deficit in the upcoming budget. The panel is split on when it would be wise to publicly announce long-run plans to address the deficit and the debt. The majority of the panel supports a mix of financing options when action is taken, with tax increases receiving strong support and not a single panellist supporting public spending cuts.

Thomas Plümper, Eric Neumayer, 11 June 2020

Is Covid-19 a ‘rich man’s disease’, as many citizens in poorer countries believe it to be? This column descibes how in Germany, infections began with individuals returning from skiing holidays. In the first phase of the pandemic, infection rates were higher in richer areas and lower in more socially deprived districts. In the second phase, the ability to socially distance oneself mattered more – an ability that is itself socioeconomically stratified. Richer districts are now seeing fewer new infections, and the initial safety advantage of more socially deprived districts has disappeared.

Marco Pagano, Christian Wagner, Josef Zechner, 11 June 2020

Whether COVID-19 will trigger a massive reallocation of capital and labour is a key question for policymakers and investors alike. This column shows that asset markets reveal large cross-sectional differences in the repricing of industries before, during, and after the onset of COVID-19. Firms that are more resilient to social distancing significantly outperformed in the six years before and during the COVID-19 outbreak. Looking into the future, stock options imply that investors require significantly lower returns from more pandemic-resilient firms. Governments would be unwise to ignore these signals, directing public financial resources mainly to prop up ailing low-resilience firms.

Francesca Borgonovi, Elodie Andrieu, 10 June 2020

Reducing social contacts can slow the spread of COVID-19. This column examines mobility patterns across US counties between mid-February and mid-May 2020. It finds that reductions in mobility differed across counties, and that community-level social capital can explain the geographic variations in mobility trends. Individuals reduced mobility earlier and to a higher degree in counties with high levels of social capital. Many counties, particularly in the Southeast US, may be especially vulnerable to COVID-19, matching low levels of social capital with high rates of chronic disease.

Annie Tubadji, Don Webber, Frederic Boy, 10 June 2020

The general public’s mental health can be affected by different public policy responses to a pandemic threat. Italy, the UK and Sweden implemented distinct approaches to the COVID-19 pandemic: early lockdown, delayed lockdown, and no lockdown. This column presents a novel culture-based Development approach using narrative economics of language and Google trend data. It is evident that countries had a pre-existing culturally relative dispositions towards death-related anxiety and their sensitivity to COVID-19 public policy was country-specific. Further, one country’s lockdown policy can affect another country’s mental health, suggesting that policymakers should account for this spillover effect.

Jeanet Bentzen, 09 June 2020

In times of crisis, humans have a tendency to turn to religion for comfort and explanation. The COVID-19 pandemic is no exception. Using daily data on Google searches for 95 countries, this column demonstrates that the COVID-19 crisis has increased Google searches for prayer (relative to all Google searches) to the highest level ever recorded. By the end of March 2020, more than half of the world population had prayed to ‘end the coronavirus’. Prayer searches rose at all levels of income, inequality, and insecurity, but not for the 10% least religious countries.

Sebastian Barnes, Eddie Casey, 09 June 2020

The Covid-19 crisis has highlighted the role of fiscal policy and transformed the outlook for public finances. This column explores economic and fiscal scenarios for a small euro area country to 2025. Due to the high uncertainty, it argues for a state-contingent approach to policy. Low interest rates, if maintained, along with ‘high-altitude’ debt dynamics could create substantial headroom for the fiscal response and make future adjustments to put the debt ratio on a downward path more manageable.

Francesco D'Acunto, Daniel Hoang, Michael Weber, 08 June 2020

The German administration has just released their €130 billion economic stimulus package, the most prominent measure of which is an unconventional fiscal policy in the form of a sudden drop in VAT. The aim is to create a future path of increasing sales taxes by increasing prices and hence stimulating inflation expectations and aggregate demand today. This column argues that earlier episodes have shown that unconventional policy is effective because it is easily understood by non-expert households and households react to it strongly. Alternative unconventional measures, instead, such as forward guidance, are largely ineffective in part because households do not understand what such policies imply for their consumption.  

Anton Pichler, Marco Pangallo, R. Maria del Rio-Chanona, François Lafond, J. Doyne Farmer, 07 June 2020

Many governments are slowly unwinding their economies from nationwide lockdowns. However, re-opening the economy entails a serious trade-off between fostering economic output and keeping the spread of infection low. This column reports several re-opening scenarios for the UK economy, documenting their projected impacts on both GDP and the spread of the virus. The results suggest that it is best to re-open upstream industries first, as they provide a large direct and indirect economic boost at a relatively lower cost in terms of further epidemic spreading.

Shaun P. Hargreaves Heap, Christel Koop, Konstantinos Matakos, Asli Unan, Nina Weber, 06 June 2020

The behavioural interventions to control the spread of COVID-19 present trade-offs between health and wealth. To be successful, an understanding of how the public currently values lives over economic loss is needed. A survey experiment in the US and UK finds that people highly prioritise saving lives, but this valuation will change as economic losses mount. Individual differences in valuation also predict individual compliance with COVID-19 policies, and information on COVID-19 deaths and income losses can affect valuations. Caution in relaxing the lockdown will help build public support and mitigate polarising effects and, through increasing compliance, improve its economic efficacy.

Dirk Niepelt, Martín Gonzalez-Eiras, 05 June 2020

The COVID-19 shock has changed the discipline of economics in that it has brought an interest in epidemiology into the foreground of economic analysis. This column explores how traditional models of infectious diseases can be combined with an additional economic layer on top. This hybrid approach can help draw accurate predictions for the long run impact of the crisis, without substantive loss in terms of ‘realism’ or flexibility.

Nikos Askitas, Konstantinos Tatsiramos, Bertrand Verheyden, 05 June 2020

In an attempt to mitigate the spread of COVID-19, countries around the world have implemented a number of lockdown policies, which varied in timing and intensity. This column presents the findings of an evaluation study across 135 countries on the effects of these policies on the daily incidence of COVID-19 and on various population mobility patterns. Policies preventing close contacts in large groups, such as public events, private gatherings, and schools are the most effective in reducing new infections. These effects are mediated by changes in population mobility patterns, which are consistent with time-use and epidemiological factors.

Pragyan Deb, Davide Furceri, Jonathan D. Ostry, Nour Tawk, 05 June 2020

Countries have implemented several containment measures to halt the spread of COVID-19 and limit the number of fatalities. This column, using daily data on coronavirus cases and deaths as well as on real-time containment measures implemented by countries, argues that containment measures have been very effective in flattening the ‘pandemic curve’. The effects have been stronger in countries where containment measures have been implemented faster and in those with a larger share of an elderly population, stronger health systems, lower temperatures, and lower population density.

Çağatay Bircan, Ralph De Haas, Helena Schweiger, Alexander Stepanov, 03 June 2020

As lockdown measures continue, or are relaxed only gradually, many small businesses continue to experience significantly reduced turnover. This column reports on a firm-level analysis across 16 emerging markets, and three Western European comparator countries, in order to gauge the potential risks associated with debt-driven COVID-19 support. The overall goal is to prevent a wave of bankruptcies that could break valuable relationships between firms and their suppliers and employees. However, liquidity support in the form of additional bank lending may create debt-overhang problems in the future and therefore requires careful targeting.

Erik Berglöf, Gordon Brown, Helen Clark, Ngozi Okonjo-Iweala, 02 June 2020

Our world is at a critical moment. May 30th saw the highest daily figure recorded worldwide for new cases of COVID-19, with countries on every continent attempting to stop the transmission of the virus and save lives. In this letter to world leaders, more than 230 former world leaders and leading global health experts and economists underline the urgency of addressing the medical emergency and providing debt relief to the poorest countries and more resources to the international financial institutions delivering immediate relief to countries facing the effects of an unprecedented, global crisis. They also call for the global health and financial architecture to be further strengthened, and in parts redesigned, to enhance our preparedness and capacity to act with speed and at scale to fight future crises. 

Giovanni Peri, Imran Rasul, 01 June 2020

Economists can play a key role in helping policymakers and the public understand the unfolding economic effects of the crisis. In March 2020, the European Economic Association established a registry of COVID-19-related projects, inviting research teams working with real-time data during this crisis to share their work. This column gives an overview of the registered projects, highlighting topics economists are working on and methods being used. It also calls attention to areas and topics that are relatively understudied.

Jonathan Portes, 01 June 2020

Both economists and policymakers have highlighted the danger that the short-term measures taken to limit the spread of Covid-19 could lead to lasting economic damage. This column identifies and discusses five conceptually separate channels that could lead to such ‘scarring’ and attempts a very rough quantification of the potential impacts in both the short to medium term and longer term.  Policy will eventually need to ‘pivot’ from helping firms survive and preserving jobs to helping workers into new jobs.

Lucie Gadenne, Maitreesh Ghatak, 30 May 2020

As debates about the future of the World Health Organization rage on, the Covid-19 pandemic is a reminder of the vital importance of global public health institutions. This column considers what principles should guide WHO’s missions and tools to deal with pandemics, which are distinguished from other health risks by their high contagion, extreme potential outcomes in terms of mortality risk, and the ‘weak-link’ aspect of global collective action. It argues that reforms should centre around having a narrower mission – Global Response to Infectious Diseases, or GRID – and creating better incentives to prevent contagions from spreading globally using stronger legal and financial tools. 

Nicola Fuchs-Schündeln, Moritz Kuhn, Michèle Tertilt, 30 May 2020

The COVID-19 crisis has hit women’s employment particularly hard, partly because the worst-hit sectors have high female employment shares, but also because schools and daycare closures have forced more mothers to leave their jobs. This column looks at Germany, where 26% of the workforce has children aged 14 or younger, and quantifies the macroeconomic importance of working parents. If schools and daycare centres remain closed as the economy slowly reopens, 11% of workers and 8% of all working hours will be lost to the labour market. Policies to restart the economy must accommodate the concerns of these families.

Patrick Bolton, Lee Buchheit , Pierre-Olivier Gourinchas, Mitu Gulati, Chang-Tai Hsieh, Ugo Panizza, Beatrice Weder di Mauro, 28 May 2020

The official sector has moved swiftly to assist the poorer countries most affected by the Covid-19 pandemic, under the banner of the Debt Service Suspension Initiative.  Will private sector creditors follow suit? The G20 "called upon" commercial creditors to provide comparable forbearance but did not mandate it. In response, the private sector has offered an impressive list of the reasons why a temporary deferral of payments to commercial creditors will be time-consuming, expensive and possibly very damaging to the debtor countries requesting it. This column discusses the challenges in attempting to coordinate wholly voluntary private sector debt relief for sovereigns afflicted by the pandemic.

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