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.

Charles Manski, 12 June 2020

Formation of COVID-19 policy must cope with many substantial uncertainties about the nature of the disease, the dynamics of the pandemic, and behavioural responses. This column argues that instead of making policy that is optimal in hypothetical scenarios but potentially far from optimal in reality, it is more prudent to approach COVID-19 policy as a problem in decision making under uncertainty. Under ‘adaptive diversification’, a range of policies would be implemented across locations and policymakers would be able to revise the proportion of locations assigned to each policy as evidence accumulates.

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. 

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