David Popp, Francesco Vona, Joëlle Noailly, 04 July 2020

Many governments worldwide are currently considering fiscal recovery packages to address the Covid-19 crisis. This column analyses the impact of past green fiscal stimulus on employment. Focusing on the American Recovery and Reinvestment Act after the Global Crisis, it finds that that the green stimulus was particularly effective in creating jobs in the long run, but not in the short run. Hence, while green stimulus packages are useful to reorient the economy and direct it onto a green trajectory in the longer run, they are less effective in restarting the economy quickly.

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You are invited to a CEPR / LSE IGA / SPP webinar on:
 
Defending the global commons in a
COVID-19 world

Join us on Thursday 2 July 2020
14:45-16:00 (BST, London), 15:45 - 17:00 (CST)

Panellists:
Ketan Patel, CEO and Co-Founder, Greater Pacific Capital 
Raghuram Rajan, Katherine Dusak Miller Distinguished Service Professor of Finance, Chicago Booth School of Business
Dali Yang, William Claude Reavis Professor in the Department of Political Science, University of Chicago 
Ksenia Yudaeva, First Deputy Governor and Member of the Board of Directors, Central Bank of the Russian Federation

Chair and Moderator:
Erik Berglöf, Director, Institute of Global Affairs, LSE School of Public Policy and Fellow, CEPR

The COVID-19 pandemic has reinforced global rifts. What does this mean for our ability to respond to the intertwined medical emergency and economic crisis? How does the increased tension affect our capacity to address other global emergencies and challenges? What is the future of multilateralism? Can the global architecture cope with these tectonic shifts? Many countries, especially those in the developing world, rely heavily on the multilateral institutions. How will they fare in a more fractured world? Who will defend the global commons? Is there a way to restore the common ground?

Join Erik Berglöf, Ketan Patel, Raghuram Rajan, Dali Yang and Ksenia Yudaeva in this webinar discussion.

Note: this webinar is one of several parallel thematic sessions taking place as part of the Maryam Forum organised by LSE. As such, it does not require registration. Simply add the event with the joining link to your calendar:

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Arash Nekoei, Andrea Weber, 01 July 2020

Temporary layoffs have exploded during the COVID-19 pandemic. This column analyses temporary layoffs in Austrian data and argues that the share of temporary layoffs contains information about employers’ forecasts of the future of their businesses.

Luan Borelli, Geraldo Goes, 01 July 2020

Brazil has faced great difficulties in controlling the COVID-19 epidemic, having become the world’s epicentre of the coronavirus pandemic and recently reaching 50,000 fatalities. This column argues that the great heterogeneities between states in Brazil, together with difficulties in political coordination, may have shaped these consequences. Looking at five states, it investigates whether certain differences in the states’ intrinsic characteristics may have influenced the dynamics of the local epidemic. Governments may need to consider local conditions and adopt heterogeneous containment policies.

Apostolos Davillas, Andrew M Jones, 30 June 2020

The economic and policy response to COVID-19 has created specific gradients in both exposure to the disease itself and in exposure to the economic impact of the lockdown. This column uses survey data to show that inequality in psychological distress has increased since the pandemic in the UK. However, the proportion of inequality explained by observed individual circumstances has decreased. Pre-pandemic, the largest contributors were financial, employment and housing conditions. By April 2020, age and gender accounted for a larger share, through the impact of the pandemic on mental wellbeing among young people. Working in COVID-affected industries, household composition and parental occupation have also increased their association with the inequality in psychological distress. 

Aida Caldera, Shashwat Koirala, 30 June 2020

International cooperation amplifies individual countries’ efforts; in the fight against the COVID-19 pandemic, international cooperation is not only useful, but indispensable. This column discusses eight priorities to strengthen international cooperation against COVID-19, both in the short term for crisis response, and to facilitate an inclusive and sustainable recovery. In the short run, cooperation between governments is needed to curb the pandemic and expedite exit from the crisis. In the medium and long run, internationally coordinated policies can facilitate recovery and the rebuilding of socioeconomic systems in inclusive and sustainable ways and help prepare for future risks and pandemics.

Alissa Kleinnijenhuis, Laura Kodres, Thom Wetzer, 30 June 2020

The COVID-19 induced ‘Great Lockdown’ has cast doubt on the efficacy of bank buffers in supporting the real economy in times of crisis. Despite accommodative regulatory and supervisory action, banks remain hesitant to draw on their buffers to maintain credit provision. Recognising the difficulty in judging the demand for credit in the midst of the COVID-19 crisis, this column focuses on the potential supply of credit and explores the obstacles to ‘usability’ of bank capital. It concludes that the current capital framework falls short: there is not enough ‘usable capital’, and the disincentives to actually draw it down are too strong. Finally, it recommends improvements in current capital framework to overcome these issues.

Frank Pisch, 30 June 2020

The Covid-19 pandemic has re-opened debate about the merits and drawbacks of highly coordinated global supply chains in manufacturing. This column documents the economic relevance, geographical properties and ownership structure of French manufacturing firms in international just-in-time supply chains – as well as potential implications for global value chains in a post-Covid-19 world. Just-in-time supply chains are likely to become more prevalent, contribute to further regionalisation of international trade, and generate an increase in multinational production.

Orsetta Causa, Maria Chiara Cavalleri, 30 June 2020

The Covid-19 pandemic risks exacerbating existing inequalities. This column analyses distributional aspects of the crisis by focusing on non-standard workers, whose limited access to social protection and job retention schemes make them particularly vulnerable to labour market disruptions. The authors discuss which policy actions governments have taken thus far and which policies they can pursue further in order to support vulnerable workers and avert the risk of a pandemic inequality feedback loop.

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. 

David Baqaee, Emmanuel Farhi, 29 June 2020

Covid-19 is an unusual combination of supply and demand shocks. These shocks propagate through supply chains, causing different sectors to become demand-constrained or supply-constrained. This column uses a disaggregated Keynesian model to identify the shocks, classify the sectors, and draw implications for policy. Negative sectoral supply shocks and shocks to the sectoral composition of demand generate more than 7% inflation, and this inflation is kept in check by a large negative aggregate demand shock. There is considerable slack in economy, with 6% Keynesian unemployment, but it is concentrated in certain sectors. As a result, untargeted aggregate demand stimulus, while desirable, is less effective than in a typical recession. 

Morten Bennedsen, Birthe Larsen, Ian Schmutte, Daniela Scur, 28 June 2020

Much of the economic turmoil caused by the COVID-19 pandemic is channelled through firms and their managers’ decisions. Responding to the pandemic, governments have closed non-essential workplaces and imposed social distancing measures while offering firms various forms of aid. Using firm-level survey data from Denmark, this column examines the impact of these measures on firms, and the uptake and effects of certain policy tools used in Denmark, which are similar to those used in many other countries. It shows that while most firms suffered pronounced revenue declines, targeted government policy helped many stay afloat, and created incentives for job retention.

Lena Edlund, Cecilia Machado, 27 June 2020

The urban renewal that transformed many US inner cities may have hit its first major speed bump with the outbreak of Covid-19. The ‘space versus commute’ trade-off has been thrown into doubt and confusion by work-from-home orders. This column draws on socioeconomic history, arguing that a mass exodus of skilled professionals to the suburbs could have major implications for inner city areas. Although this could spell the return to the homicidal days of the 1980s, the authors argue that this may not be the case – the reason being: cell phones and how they have impacted illicit drug retailing.

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.

Supriya Garikipati, 26 June 2020

There have been regular news stories about how female leaders have done a better job at responding to the Covid-19. Is this really true, or just a media narrative based on a tiny sample? Supriya Garikipati of Liverpool University and Uma Kambhampati at Reading Tell Tim Phillips about how gender-based differences in leadership style may have saved lives and helped economies reopen earlier.

Titan Alon, Minki Kim, David Lagakos , Mitchell VanVuren, 26 June 2020

The COVID-19 pandemic has led to dramatic policy responses in most advanced economies, and in particular sustained lockdowns matched with sizable transfers to workers. This column discuss the extent to which developing countries should try to replicate these policies. Due to differences in labour market informality, fiscal capacity, healthcare infrastructure, and demographics, blanket lockdowns appear less effective in developing countries. Age-targeted policies – where the young are allowed to work while the old are shielded from the virus – can potentially save both more lives and livelihoods.

Facundo Piguillem, Liyan Shi, 26 June 2020

Given the wide range of strategies pursued by governments coping with COVID-19, the question of ‘who got it right’ is unavoidable. This column argues that the combination of issues at stake – the chance to eliminate the virus, the statistical value of life, and the behavioural reactions to social distancing – makes it possible to rationalise quite different government reactions. Nevertheless, one tool could have substantially reduced the economic cost of quarantines and was vastly underutilised by most countries: testing.

Koen Berden, Joseph Francois, Fredrik Erixon, 26 June 2020

Calls for more protectionism have been on the rise for some time now, and have surged again with the Covid-19 pandemic. This column points to similar policies and their negative consequences during the Great Depression. Discussing similarities and differences of the economic situation between then and now and drawing on lessons from the Great Depression, it highlights the very negative consequences of increasing protectionism.

Neil Gandal, Matan Yonas, Michal Feldman, Ady Pauzner, Avraham Tabbach, 25 June 2020

COVID-19 deaths rates vary widely across European countries, from as low as 5 deaths per million in Slovakia to as high as 760 deaths per million in Belgium (as of May 13). Using data on 32 countries from the WHO European Health Information Gateway, this column shows that the COVID -19 death rate is higher in countries with more long-term care beds. This provides evidence that living in long-term care facilities is a significant risk factor for death from COVID-19, and suggests that countries should adopt policies to protect their older populations living in such facilities before the second wave (likely) arrives.  

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