Macroeconomic policies and the pandemic-driven recession

Public health events and economic growth in a neoclassical framework

Public health events (PHEs) have emerged as significant threats to human life, health, and economic growth. PHEs, such as COVID-19, have prompted a reevaluation for enhanced regular prevention and control (RPC). In this study, we focus on the core concept of prevention and control intensity (PCI), and establish a neoclassical economic growth model from the long-term and macro perspective to balance life protection and economic growth. The model construct the mechanism of PCI on economic growth through population dynamics and capital accumulation under the backdrop of RPC for PHEs. We find the conditions for PCI when the economy achieves steady state, and provides an algorithm establishing the optimal strategy that maximises per capita disposable income based on the optimal PCI and consumption. Simulation result quantifies an inverted U-shaped relationship between PCI and capital per capita, output per capita and consumption per capita in the steady state. The model suggests that, given the PHEs of inducing potential unemployment shock, it is worthwhile to combine the implementation of moderate PCI with coordinated policies of income distribution.

Green recovery in the wake of public health emergencies: Policy instruments and their effects in China

Numerous studies have discussed the economic impacts of the COVID-19 pandemic in recent years. However, the effectiveness and trade-offs of diverse countermeasures still need to be investigated, particularly under the long-term goal of low-carbon transition, which is crucial for understanding the potential impacts of the future public health emergency (PHE) related economic crisis. Given that China still faces big pressures from the potential PHE and carbon neutrality, this paper assesses the effectiveness of policy instruments in restoring the economy and advancing green development after the PHE using the Dynamic Stochastic General Equilibrium framework. Our findings reveal that the PHE imposes more constraints on the economy because of the decrease in productivity on the supply side and in consumption on the demand side. Compared to the other counterparts, the mixed stimulus can overcome the adverse impacts of the PHE while contributing to carbon reduction. Furthermore, all types of low-carbon policies investigated in this study can contribute to carbon reduction at the expense of economic growth. Meanwhile, the carbon tax realizes the target of reducing emissions with the smallest negative impact on economic growth. Thus, we suggest adopting the carbon tax policy as the most effective low-carbon measure to address uncertainties associated with the PHE.

Risk-reducing strategies and labour vulnerability during the pandemic in India

The Covid-19 health disaster has created a labour crisis. We examine the impact of the Covid-19 induced state-level direct (such as providing free food, minimum income, and transportation services for the labourers) and indirect (such as skill mapping of the return migrants and allowing extended hour shifts in the factories) risk-reducing labour strategies on urban and rural employment rates in India. These risk-reducing labour strategies secure livelihood and discourage labourers from risking their lives by joining the workplace of high interpersonal human contact during the pandemic. This reduces employment rates. Specifically, direct risk-reducing labour strategies reduce employment in urban and rural areas, while indirect risk-reducing labour strategies lessen employment only in urban areas. The mitigating effect justifies the importance of the Keynesian interventionist resilience techniques that safeguard the labourers and reduce the risks during the disaster.

Applying Monte Carlo Simulations to a Small Data Analysis of a Case of Economic Growth in COVID-19 Times

Studies on the going-on COVID-19 pandemic face small sample issues. In this context, Bayesian estimation is considered a viable alternative to frequentist estimation. Demonstrating the Bayesian approach's advantage in dealing with this problem, our research conducted a case study concerning ASEAN economic growth during the COVID-19 pandemic. By using Monte Carlo standard errors and interval hypothesis testing to check parameter bias within a Bayesian MCMC simulation study, the author obtained significant conclusions as follows: first, in insufficient sample sizes, in contrast to frequentist estimation, the Bayesian framework can offer meaningful results, that is, expansionary monetary and contractionary fiscal policies are positively associated with economic growth; second, in the face of a small sample, by incorporating more information into prior distributions for the model parameters, Bayesian Monte Carlo simulations perform so far better than naïve Bayesian and frequentist estimation; third, in case of a correctly specified prior, the inferences are robust to different prior specifications. The author strongly recommends applying specific informative priors to Bayesian analyses, particularly in small sample investigations.

Macroeconomic Effects of COVID-19 Pandemic: Fresh Evidence from Korea

Korea’s economy has suffered greatly as a result of the COVID-19 pandemic. Based on such a background, this paper investigates the macroeconomic effects of the COVID-19 pandemic. Via impulse response function analysis, the results reveal that the COVID-19 pandemic has a considerable short-term influence on Korea’s key macroeconomic variables, while its long-term effects are not significant. As a consequence of the COVID-19 pandemic, total demand in Korea has decreased. It is mostly reflected in the lower consumption and investment demand. Simultaneously, this has put increased pressure on inflation and unemployment. Moreover, the results also show that government investment expenditure and monetary policy may, to some degree, ameliorate the status of consumption demand. Meanwhile, they may alleviate employment pressures in order to boost output. In reality, both have some negative consequences. Based on the evidence presented in this article, the Korean government may implement appropriate policies to ensure the smooth functioning of the Korean macroeconomy.

A Literature Review of Pandemics and Development: the Long-Term Perspective

Pandemics have been a long-standing object of study by economists, albeit with declining interest, that is until COVID-19 arrived. We review current knowledge on the pandemics' effects on long-term economic development, spanning economic and historical debates. We show that all economic inputs are potentially affected. Pandemics reduce the workforce and human capital, have mixed effects on investment and savings, but potentially positive consequences for innovation and knowledge development, depending on accompanying institutional change. In the absence of an innovative response supporting income redistribution, pandemics tend to increase income inequalities, worsening poverty traps and highlighting the distributional issues built into insurance-based health insurance systems. We find that the effects of pandemics are asymmetric over time, in space, and among sectors and households. Therefore, we suggest that the research focus on the theoretical plausibility and empirical significance of specific mechanisms should be complemented by meta-analytic efforts aimed at reconstructing the resulting complexity. Finally, we suggest that policymakers prioritize the development of organizational learning and innovative capabilities, focusing on the ability to adapt to emergencies rather than developing rigid protocols or mimicking solutions developed and implemented in different contexts.

Stock market volatility and the COVID-19 reproductive number

The media has prominently featured the totemic reproductive number R in its COVID-19 coverage despite being an imperfect measure of the degree of infectivity of the virus. As such, it conveys information to the public regarding the state of the pandemic that affects market sentiment. We analyze how news about R affects the volatility in stock markets worldwide and find that when R is greater than one, which means the spread of the disease should soar, it has a positive and significant effect on volatility. Our results hold after controlling for government interventions and several robustness checks.

FX markets’ reactions to COVID-19: Are they different?

In this paper, we empirically investigate the impact of the COVID-19 pandemic on FX markets. We find important differences between COVID-19 and previous high-risk episodes: the Global Financial Crisis, the Swiss National Bank's removal of the Swiss franc/euro floor, and Brexit. Contrary to these episodes, the USD did not show any safe haven characteristics during the pandemic. Furthermore, the estimated volatility and non-parametric value-at-risk of three currency portfolios indicate that COVID-19 was not as risky as previous stressful events. We provide evidence that investors could minimize COVID-19 risk by investing in the Canadian dollar and the Japanese yen, and by reducing their exposure to European currencies.

Modeling COVID-19 Cases Statistically and Evaluating Their Effect on the Economy of Countries

COVID-19 infections have plagued the world and led to deaths with a heavy pneumonia manifestation. The main objective of this investigation is to evaluate the performance of certain economies during the crisis derived from the COVID-19 pandemic. The gross domestic product (GDP) and global health security index (GHSI) of the countries belonging–or not–to the Organization for Economic Cooperation and Development (OECD) are considered. In this paper, statistical models are formulated to study this performance. The models’ specifications include, as the response variable, the GDP variation/growth percentage in 2020, and as the covariates: the COVID-19 disease rate from its start in March 2020 until 31 December 2020; the GHSI of 2019; the countries’ risk by default spreads from July 2019 to May 2020; belongingness or not to the OECD; and the GDP per capita in 2020. We test the heteroscedasticity phenomenon present in the modeling. The variable “COVID-19 cases per million inhabitants” is statistically significant, showing its impact on each country’s economy through the GDP variation. Therefore, we report that COVID-19 cases affect domestic economies, but that OECD membership and other risk factors are also relevant.