Asger Lau Andersen, Emil Toft Hansen, Niels Johannesen, Adam Sheridan, 15 May 2020

The COVID-19 pandemic has had drastic effects on consumer spending across the world. This column presents evidence based on bank account transaction data from Denmark showing that total card spending was reduced by 25% during the early phase of the crisis. The drop was mostly concentrated on goods and services whose supply is directly restricted by government interventions, suggesting a limited role for spillovers to non-restricted sectors through demand in the short term.

Marcus Hagedorn, Kurt Mitman, 15 May 2020

Heterogeneous-Agent New Keynesian models offer new perspectives on fiscal and monetary policy interaction in the euro area. The current question is whether ECB measures are predominantly motivated to ensure price stability (with fiscal consequences a side effect), or whether they are motivated by an overriding economic policy objective. This column presents evidence that, according to the HANK models, there is no distinct separation between fiscal and monetary policy. Fiscal policy is an important determinant of inflation at the zero lower bound, and properly designed asset purchases are an effective instrument to satisfy the price stability mandate.

Refet Gürkaynak, Deborah Lucas, 14 May 2020

The current macroeconomic policy scene in advanced economies is dominated by three interrelated challenges: rapidly meeting the unprecedented spending needs to respond to the COVID-19 crisis, while holding government debt to a sustainable level and avoiding deflation. This column argues that monetising some of the pandemic-related debt would be the best way to address all three issues simultaneously, even if it risks some future above-target inflation. It proposes a particular mechanism for debt monetisation, with the proceeds used to fund the partial replacement of lost wages through the banking system. The proposed mechanism effectively monetizes the cost of the programme, in contrast to central banks' current debt purchase programmes which, for the most part, have not yet resulted in monetisation.   

Ayça Tekin-Koru, 14 May 2020

The strict and prolonged age-specific containment measures in Turkey have both reduced infection/death rates and enabled less strict restrictions for the lower-risk groups. This column reviews Turkey’s response and examines the real-time effects of the COVID-19 crisis on production in Turkey. If finds that the targeted containment measures appear to have helped reduce a contraction in production that could have been much worse with a uniform lockdown. It also finds that the major brunt of the health crisis in terms of its human costs has been borne by the working class.

Valerie Cerra, Antonio Fatás, Sweta C. Saxena, 14 May 2020

As many countries enter deep economic downturns, many wonder about the shape and length of the recession, as well as the steepness of the recovery. Past recessions have left permanent scars on long-term growth, known as hysteresis. This column reviews the hysteresis academic literature to gain insights on the current crisis and the policies that should be put in place to minimise its long-term effects. Continued macroeconomic stimulus, where policy space exists, is needed using an array of instruments. Now is not the time to err on the side of caution when it comes to expansionary economic policies.

Chang Ma, John Rogers, Sili Zhou, 13 May 2020

Forecasting the progress and impact of COVID-19 is central to the planning of policymakers around the world. This column provides a historical perspective by examining the immediate and bounce-back effects from six post-war disease shocks. GDP growth contractions are immediate and sizeable, but vary across countries. Despite an immediate ‘bounce back’, GDP tends to remain below its pre-shock level for several years. The negative effect on GDP is felt less in countries with larger first-year responses in government spending, especially on health care, and the indirect effects on GDP growth from affected trading partners are also important.

Massimo Bordignon, Guido Tabellini, 13 May 2020

The subsidiarity principle implies that the EU should do what member countries cannot do by themselves. In the context of the current crisis, this implies issuing very long-term debt. This column argues that this could be achieved by endowing the new EU Recovery Fund with genuinely own EU sources of revenue. Providing the EU with revenue from EU own tax bases would also improve the quality of EU expenditures, and could pave the way to the creation of a euro area fiscal capacity.

Cara Pacitti, Richard Hughes, Jack Leslie, Charlie McCurdy, James Smith, Daniel Tomlinson, 12 May 2020

With experts warning that social distancing measures could remain in place for much of this year in the UK, the fiscal pressures faced by the government could well be much more severe than recent official forecasts suggest. Drawing on three scenarios for the economic impact of social distancing lasting for 3, 6 or 12 months, this column looks at the impact on the UK public finances. It suggests that borrowing will rise to historic highs in all three scenarios. This poses liquidity challenges for the government in the near term, and leaves the government more vulnerable to changes in interest rates or inflation in the medium term given far higher debt stocks.

Charles Wyplosz, Beatrice Weder di Mauro, 11 May 2020

CEPR’s new vehicle for rapidly vetting and disseminating economic research on Covid-related issues is thriving – attracting something like six papers per day with about 40% passing the rapid, up-down vetting process. From its founding, the idea was that papers issued in Covid Economics would be submitted to professional journals after revision. Leading journals in the profession – including AER, JPE, REStud, and QJE – have accepted that appearing in Covid Economics does not constitute publication but rather is viewed as a posting in a working paper series. 

Sophia Chen, Deniz Igan, Nicola Pierri, Andrea Presbitero, 11 May 2020

The COVID-19 pandemic and the associated lockdowns have led to unprecedented economic costs around the world. Using high-frequency indicators, this column shows that while COVID-19 is a global shock, European countries and US states with larger outbreaks have suffered significantly larger economic losses. The impact of COVID-19 is mostly captured by changes in people’s observed mobility whereas, so far, there is no robust evidence supporting additional impact from the adoption of non-pharmaceutical interventions, especially in the US. The results indicate a crucial role for communication and trust-building.

Jamus Lim, 11 May 2020

Large fiscal expenditures, as well as more loans by households and firms, will lead to sharp increases in public and private debt in the near future. The resulting debt burdens may impact both post-lockdown economic recovery and medium-run growth prospects. This column presents evidence on the effects of the total debt burden on output dynamics. The results suggest increases in total debt to GDP have significant negative effects on growth. Helping economies recover from the dramatic COVID-19 shock will require tackling both public and private borrowing. 

Marcus Painter, Tian Qiu, 11 May 2020

Social distancing is vital to mitigate the spread of the novel coronavirus. Leveraging smartphone geolocation data, this column examines how political beliefs impact the effectiveness of state-level social distancing orders in the US. The findings suggest that Republicans and misaligned Democrats are less likely to adhere to social distancing orders. Bipartisan support for social distancing measures thus appears to be a key factor in how quickly we can mitigate the spread of the novel coronavirus.

Jack Leslie, Richard Hughes, Charlie McCurdy, Cara Pacitti, James Smith, Daniel Tomlinson, 11 May 2020

The scale of the economic impact of coronavirus is only starting to become clear, but effective government policy responses depend on realistic estimates of the depth and length of the recession. Drawing on theory, experience from past viral outbreaks, and real-time data, this column presents three scenarios for the UK economy over the next five years. Economic outcomes could easily be worse than many current forecasts. Crucially, the duration and strictness of social distancing restrictions will define the total loss in output during the crisis and influence the likely pace of recovery post-crisis.

Janine Berg, Florence Bonnet, Sergei Soares, 11 May 2020

Working from home can help mitigate the public health and economic consequences of the COVID-19 pandemic. This column estimates the share of workers across the different regions of the world who could potentially perform their activities from home, using a Delphi survey of labour market experts from across the world and then weighing these estimates by countries’ occupational shares. The analysis shows that approximately one in six workers at the global level, and just over one in four in advanced countries, could potentially work from home.  

Christelle Baunez, Mickael Degoulet, Stéphane Luchini, Patrick Pintus, Miriam Teschl, 10 May 2020

Tests are crucial to detect people who have been infected by COVID-19 and to observe in real time whether the dynamics of the pandemic are accelerating or decelerating. However, tests are a scarce resource in many countries. This column proposes a data-driven and operational criterion to allocate tests efficiently across regions, with a view to maximising the fraction of tested people who are positive. When applied to Italian regions, the criterion reveals that the shares of tests that should go to each region differ significantly from the present distribution.

Gene Ambrocio, 09 May 2020

Across Europe, the COVID-19 pandemic has led to sharp declines in household sentiment and increases in the dispersion of household views about the state of the economy as well as their own individual finances. In contrast, household uncertainty has been left relatively unchanged. This column finds that the drop in household sentiment is larger in countries where the containment measures put in place to address the pandemic are more stringent, suggesting notable additional costs to the lockdown measures.

Ramanand Jeeneea, Kaviraj Sharma Sukon, 09 May 2020

The government of Mauritius responded early to the COVID-19 pandemic with stringent lockdown measures and saw a drastic reduction in new cases. This column examines the Mauritian response and estimates that the measures led to an 80% reduction in the coronavirus transmission rate. A well-implemented and early ‘hard lockdown’ can be effective in managing the spread of COVID-19.

Davide Furceri, Prakash Loungani, Jonathan D. Ostry, Pietro Pizzuto, 08 May 2020

Major epidemics in this century have raised income inequality and hurt the employment prospects of people with low educational attainment, while scarcely affecting those with advanced degrees. This column argues that the COVID-19 pandemic could have similar distributional consequences unless this time is different and government policies end up being effective in raising boats more than yachts.

Richard Baldwin, 07 May 2020

Thanks to the contributions of literally hundreds of policy-relevant economists from around the world, VoxEU.org has become a key global hub of research-based analysis of COVID-19 economic issues since early March 2020. This column presents some of the statistics and early milestones. For instance, it shows that in April 2020, VoxEU.org had 1.6 million page views from 767,000 users. 

Annie Tubadji, Don Webber, Frederic Boy, 08 May 2020

The COVID-19 pandemic is a deadly threat to human life on our planet. This column uses a spatial analytical approach to show that the pandemic has disproportionately affected the economically and socially vulnerable places across the UK along the lines of existing economic and cultural divides. The pandemic is likely to exacerbate existing real and perceived deprivation on the brink of an expected economic shock at the end of the Brexit implementation period. If health deprivation is compounded by Brexit-related economic blows, greater protests are likely to be the result.

Pages

Events

CEPR Policy Research