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How Should Policy Responses to the COVID-19 Pandemic Differ in the Developing World?
From the Abstract: "The COVID-19 [coronavirus disease 2019] pandemic has already led to dramatic policy responses in most advanced economies, and in particular sustained lockdowns matched with sizable transfers to much of the workforce. This paper provides a preliminary quantitative analysis of how aggregate policy responses should differ in developing countries. To do so we build an incomplete-markets macroeconomic model with epidemiological dynamics that features several of the main economic and demographic distinctions between advanced and developing economies relevant for the pandemic. We focus in particular on differences in population structure, fiscal capacity, healthcare capacity, the prevalence of 'hand-to-mouth' households, and the size of the informal sector. The model predicts that blanket lockdowns are generally less effective in developing countries at reducing the welfare costs of the pandemic, saving fewer lives per unit of lost GDP [gross domestic product]. Age-specific lockdown policies, on the other hand, may be even more potent in developing countries, saving more lives per unit of lost output than in advanced economies."
National Bureau of Economic Research
Alon, Titan M.; Kim, Minki; Lagakos, David . . .
2020-05
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Can the COVID Bailouts Save the Economy?
From the Abstract: "The covid-19 [coronavirus disease 2019] crisis has led to a sharp deterioration in firm and bank balance sheets. The government has responded with a massive intervention in corporate credit markets. We study equilibrium dynamics of macroeconomic quantities and prices, and how they are affected by government policy. The interventions prevent a much deeper crisis by reducing corporate bankruptcies by about half and short-circuiting the doom loop between corporate and financial sector fragility. The additional fiscal cost is zero since program spending replaces what would otherwise have been spent on intermediary bailouts. The model predicts rising interest rates on government debt and slow debt pay-down. We analyze an alternative intervention that targets aid to firms at risk of bankruptcy. While this policy prevents more bankruptcies and has lower fiscal cost, it only enjoys marginally higher welfare. Finally, we study longer-run consequences for firm leverage and intermediary health when pandemics become the new normal."
National Bureau of Economic Research
Elenev, Vadim; Landvoigt, Tim; Nieuwerburgh, Stijn van
2020-05
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Inside the Mind of a Stock Market Crash
From the Abstract: "We analyze how investor expectations about economic growth and stock returns changed during the February-March 2020 stock market crash induced by the COVID-19 [coronavirus disease 2019] pandemic, as well as during the subsequent partial stock market recovery. We surveyed retail investors who are clients of Vanguard at three points in time: (i) on February 11-12, around the all-time stock market high, (ii) on March 11-12, after the stock market had collapsed by over 20%, and (iii) on April 16-17, after the market had rallied 25% from its lowest point. Following the crash, the average investor turned more pessimistic about the short-run performance of both the stock market and the real economy. Investors also perceived higher probabilities of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investor expectations about long-run (10-year) economic and stock market outcomes remained largely unchanged, and, if anything, improved. Disagreement among investors about economic and stock market outcomes also increased substantially following the stock market crash, with the disagreement persisting through the partial market recovery. Those respondents who were the most optimistic in February saw the largest decline in expectations, and sold the most equity. Those respondents who were the most pessimistic in February largely left their portfolios unchanged during and after the crash."
National Bureau of Economic Research
Giglio, Stefano W.; Maggiori, Matteo; Stroebel, Johannes . . .
2020-05
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Effects of the COVID-19 Pandemic on Outpatient Providers in the US
From the Abstract: "There is growing concern that the COVID-19 [coronavirus disease 2019] pandemic may have severe, adverse effects on the health care sector, a sector of the economy that historically has been somewhat shielded from the business cycle. In this paper, we study one aspect of this issue by estimating the magnitude of the COVID-19 pandemic on use of outpatient health services. We use 2010-2020 data from the Outpatient Influenza-like Illness Surveillance Network (ILINet). Our findings indicate that the COVID-19 pandemic is associated with about a 67 percent decline in the total number of outpatient visits per provider by the week of April 12-18th, 2020 relative to the same week in prior years. Effects become apparent earlier in the pandemic for outpatient visits for non-flu symptoms, but we find negative effects on outpatient visits for flu symptoms as well."
National Bureau of Economic Research
Chatterji, Pinka; Li, Yue
2020-05
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Economic Uncertainty Before and During the COVID-19 Pandemic
From the Abstract: "We consider several economic uncertainty indicators for the US and UK before and during the COVID-19 [coronavirus disease 2019] pandemic: implied stock market volatility, newspaper-based economic policy uncertainty, twitter chatter about economic uncertainty, subjective uncertainty about future business growth, and disagreement among professional forecasters about future GDP [gross domestic product] growth. Three results emerge. First, all indicators show huge uncertainty jumps in reaction to the pandemic and its economic fallout. Indeed, most indicators reach their highest values on record. Second, peak amplitudes differ greatly - from a rise of around 100% (relative to January 2020) in two-year implied volatility on the S&P 500 [Standard and Poor 500] and subjective uncertainty around year-ahead sales for UK firms to a 20-fold rise in forecaster disagreement about UK growth. Third, time paths also differ: Implied volatility rose rapidly from late February, peaked in mid-March, and fell back by late March as stock prices began to recover. In contrast, broader measures of uncertainty peaked later and then plateaued, as job losses mounted, highlighting the difference in uncertainty measures between Wall Street and Main Street."
National Bureau of Economic Research
Altig, David, 1956-; Baker, Scott R. (Scott Ross); Barrero, Jose Maria . . .
2020-06
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Impact of COVID-19 on Small Business Owners: Evidence of Early-Stage Losses from the April 2020 Current Population Survey
From the Abstract: "Social distancing restrictions and demand shifts from COVID-19 [coronavirus disease 2019] are expected to shutter many small businesses, but there is very little early evidence on impacts. This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the April 2020 CPS [current population survey] - the first month fully capturing early effects from the pandemic. The number of active business owners in the United States plummeted by 3.3 million or 22 percent over the crucial two-month window from February to April 2020. The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses. African-American businesses were hit especially hard experiencing a 41 percent drop. Latinx business owners fell by 32 percent, and Asian business owners dropped by 26 percent. Simulations indicate that industry compositions partly placed these groups at a higher risk of losses. Immigrant business owners experienced substantial losses of 36 percent. Female-owned businesses were also disproportionately hit by 25 percent. These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality."
National Bureau of Economic Research
Fairlie, Robert W.
2020-06
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COVID-19 and Remote Work: An Early Look at US Data
From the Abstract: "We report the results of a nationally-representative sample of the US population during the COVID-19 [coronavirus disease 2019] pandemic. The survey ran in two waves from April 1-5, 2020 and May 2-8, 2020. Of those employed pre-COVID-19, we find that about half are now working from home, including 35.2% who report they were commuting and recently switched to working from home. In addition, 10.1% report being laid-off or furloughed since the start of COVID-19. There is a strong negative relationship between the fraction in a state still commuting to work and the fraction working from home. We find that the share of people switching to remote work can be predicted by the incidence of COVID-19 and that younger people were more likely to switch to remote work. Furthermore, states with a higher share of employment in information work including management, professional and related occupations were more likely to shift toward working from home and had fewer people laid off or furloughed. We find no substantial change in results between the two waves, suggesting that most changes to remote work manifested by early April."
National Bureau of Economic Research
Brynjolfsson, Erik; Horton, John J.; Ozimek, Adam . . .
2020-06
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Measuring Real Consumption and CPI Bias Under Lockdown Conditions
From the Abstract: "Millions of goods and services are now unavailable in many countries due to the current coronavirus pandemic, dramatically impacting on the construction of key economic statistics used for informing policy. This situation is unprecedented; hence methods to address it have not previously been developed. Current advice to national statistical offices from the IMF [International Monetary Fund], Eurostat and the UN is shown to result in downward bias in the CPI [Consumer Price Index] and upward bias in real consumption. We conclude that the only way to produce a meaningful CPI within the lockdown period is through establishing a continuous consumer expenditure survey."
National Bureau of Economic Research
Diewert, W. E. (W. Erwin); Fox, Kevin J.
2020-05
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Socioeconomic Network Heterogeneity and Pandemic Policy Response
From the Abstract: "We develop a heterogeneous-agents network-based model to analyze alternative policies during a pandemic outbreak, accounting for health and economic trade-offs within the same empirical framework. We leverage a variety of data sources, including data on individuals' mobility and encounters across metropolitan areas, health records, and measures of the possibility to be productively working from home. This combination of data sources allows us to build a framework in which the severity of a disease outbreak varies across locations and industries, and across individuals who differ by age, occupation, and preexisting health conditions. We use this framework to analyze the impact of different social distancing policies in the context of the COVID-19 [coronavirus disease 2019] outbreaks across US metropolitan areas. Our results highlight how outcomes vary across areas in relation to the underlying heterogeneity in population density, social network structures, population health, and employment characteristics. We find that policies by which individuals who can work from home continue to do so, or in which schools and firms alternate schedules across different groups of students and employees, can be effective in limiting the health and healthcare costs of the pandemic outbreak while also reducing employment losses."
National Bureau of Economic Research
Akbarpour, Mohammad; Cook, Cody; Marzuoli, Aude . . .
2020-06
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Implications of Heterogeneous SIR Models for Analyses of COVID-19
From the Abstract: "This paper provides a quick survey of results on the classic SIR [Susceptible-Infectious-Recovered] model and variants allowing for heterogeneity in contact rates. It notes that calibrating the classic model to data generated by a heterogeneous model can lead to forecasts that are biased in several ways and to understatement of the forecast uncertainty. Among the biases are that we may underestimate how quickly herd immunity might be reached, underestimate differences across regions, and have biased estimates of the impact of endogenous and policy-driven social distancing."
National Bureau of Economic Research
Ellison, Glenn, 1965-
2020-06
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Inequality of Fear and Self-Quarantine: Is There a Trade-Off Between GDP and Public Health?
From the Abstract: "We construct a quantitative model of an economy hit by an epidemic. People differ by age and skill, and choose occupations and whether to commute to work or work from home, to maximize their income and minimize their fear of infection. Occupations differ by wage, infection risk, and the productivity loss when working from home. By setting the model parameters to replicate the progression of COVID-19 [coronavirus disease 2019] in South Korea and the United Kingdom, we obtain three key results."
National Bureau of Economic Research
Aum, Sangmin; Lee, Sang Yoon (Economist); Shin, Yongseok
2020-05
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Deglobalizaion and Social Safety Nets in Post-COVID-19 Era: Textbook Macroeconomic Analysis
From the Abstract: "Globalization is expected to be reversed, at least partially, in the post pandemic era. The Great Financial Recession of 2008-10 marked a historic turning point in the direction of weakening the degree of global economic integration. Now, in the post-pandemic era, policymakers appear poised to take deliberate steps to reinforce the movement toward de-globalization. At the same time, safety nets are expected to be strengthened. In this paper, we develop a model, with which we analyze central macroeconomic interactions between globalization and safety nets. We put together stylized elements of trade globalization, financial globalization, international tax competition, immigration, and welfare state, all in a two-skill, two-period stylized model, where policy (taxes and social benefits) is determined through majority voting."
National Bureau of Economic Research
Razin, Assaf; Sadka, Efraim; Schwemmer, Alexander Horst
2020-05
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Short-Run Effects of COVID-19 on U.S. Worker Transitions
From the Abstract: "I use Current Population Survey Data from February and April 2020 to examine how individual workers have transitioned between labor-market states and which workers have been hurt most by the COVID-19 [coronavirus disease 2019] pandemic. I find not only large effects on workers becoming unemployed but also a decline in labor-force participation, an increase in absence from one's job, and a decrease in hours worked. Generally, more vulnerable populations--racial and ethnic minorities, those born outside the U.S., women with children, the least educated, and workers with a disability--have experienced the largest declines in the likelihood of (full-time) work and work hours."
National Bureau of Economic Research
Cowan, Benjamin W.
2020-06
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Treasury Inconvenience Yields During the COVID-19 Crisis
From the Abstract: "In sharp contrast to most previous crisis episodes, the Treasury market experienced severe stress and illiquidity during the COVID-19 [coronavirus disease 2019] crisis, raising concerns that the safe-haven status of U.S. Treasuries may be eroding. We document large shifts in Treasury ownership during this period and the accumulation of Treasury and reverse repo positions on dealer balance sheets. To understand the pricing consequences, we build a model in which balance sheet constraints of dealers and demand/supply shocks from habitat agents determine the term structure of Treasury yields. A novel element of our model is the inclusion of levered investors' repo financing as part of dealers' intermediation activities. Both direct holdings of Treasuries and reverse repo positions of dealers are subject to a regulatory balance sheet constraint. According to the model, Treasury inconvenience yields, measured as the spread between Treasuries and overnight-index swap (OIS) rates, as well as spreads between dealers' reverse repo and repo rates, should be increasing in dealers' balance sheet costs. Consistent with model predictions, we find that both spreads are large and positive during the COVID-19 crisis. We further show that the same model, adapted to the institutional setting in 2007-2009, also helps explain the opposite signs of repo spreads and Treasury convenience yields during the financial crisis."
National Bureau of Economic Research
He, Zhiguo; Nagel, Stefan, 1973-; Song, Zhaogang
2020-06
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EMEs and COVID-19: Shutting Down in a World of Informal and Tiny Firms
From the Abstract: "Emerging economies are characterized by an extremely high prevalence of informality, small firm employment and jobs not fit for working from home. These features factor into how the COVID-19 [coronavirus disease 2019] crisis has affected the economy. We develop a framework that, based on accounting identities and actual data, quantifies potential job and income losses during the crisis and recovery for economies with different economic organization structures. Our analysis incorporates differential exposure of jobs across categories of firm-size and formality status, as well as sectors and occupations. We account for the direct supply shock caused by lockdowns, the idiosyncratic demand shock suffered by sectors that rely on high contact with their costumers, the transmission of both shocks through IO [input-output] linkages, and the overall aggregate demand effect derived from these shocks. Applying our framework to data for Colombia, which exhibits an employment distribution similar to that of other emerging market countries, in particular Latin America, we find that well over 50% of jobs are at risk in the initial stages of the crisis. Because informal jobs and those not fit for telework are at higher risk, this number goes down to 33% if the US employment distribution is imposed on the Colombian data. As the crisis deepens, the risk of unemployment grows. However, informality rebounds quickly in the recovery, an employment at risk is quickly reduced to 20% of the baseline, all concentrated in formal jobs. Our findings point to the importance of action to maintain formal matches from dissolving, given their scarcity and rebuilding difficulty, while protecting the poor and the informal via income transfers."
National Bureau of Economic Research
Alfaro, Laura; Becerra, Oscar; Eslava, Marcela, 1975-
2020-06
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Heterogeneous Actions, Beliefs, Constraints and Risk Tolerance During the COVID-19 Pandemic
From the Abstract: "During a pandemic, an individual's choices can determine outcomes not only for the individual but also for the entire community. Beliefs, constraints and preferences may shape behavior. This paper documents demographic differences in behaviors, beliefs, constraints and risk preferences across gender, income and political affiliation lines during the new coronavirus disease (COVID-19) pandemic. Our main analyses are based on data from an original nationally representative survey covering 5,500 adult respondents in the U.S. We find substantial gaps in behaviors and beliefs across gender, income and partisanship lines; in constraints across income levels; and in risk tolerance among men and women. Based on location data from a large sample of smartphones, we also document significant differences in mobility across demographics, which are consistent with our findings based on the survey data."
National Bureau of Economic Research
Fan, Ying (Associate Professor); Orhun, A. Yeşim; Turjeman, Dana
2020-05
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Gender Differences in COVID-19 Related Attitudes and Behavior: Evidence from a Panel Survey in Eight OECD Countries
From the Abstract: "Using original data from two waves of a survey conducted in March and April 2020 in eight OECD [Organisation for Economic Co-operation and Development] countries (N = 21,649), we show that women are more likely to see COVID-19 [coronavirus disease 2019] as a very serious health problem, to agree with restraining public policy measures adopted in response to it, and to comply with them. Gender differences in attitudes and behavior are substantial in all countries, robust to controlling for a large set of sociodemographic, employment, psychological, and behavioral factors, and only partially mitigated for individuals who cohabit or have direct exposure to COVID-19. The results are not driven by differential social desirability bias. They carry important implications for the spread of the pandemic and may contribute to explain gender differences in vulnerability to it."
National Bureau of Economic Research
Galasso, Vincenzo, 1967-; Pons, Vincent; Profeta, Paola, 1959- . . .
2020-06
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Corporate Bond Liquidity During the COVID-19 Crisis
From the Abstract: "We study liquidity conditions in the corporate bond market since the onset of the COVID-19 [coronavirus disease 2019] pandemic. We find that in mid-March 2020, as selling pressure surged, dealers were wary of accumulating inventory on their balance sheets, perhaps out of concern for violating regulatory requirements. As a result, the cost to investors of trading immediately with a dealer surged. A portion of transactions migrated to a slower, less costly process wherein dealers arranged for trades directly between customers without using their own balance sheet space. Interventions by the Federal Reserve appear to have relaxed balance sheet constraints: soon after they were announced, dealers began absorbing inventory, bid-ask spreads declined, and market liquidity started to improve. Interestingly, liquidity conditions improved for bonds that were eligible for the Fed's lending/purchase programs and for bonds that were ineligible. Hence, by allowing dealers to unload certain assets from their balance sheet, the Fed's interventions may have helped dealers to better intermediate a wide variety of assets, including those not directly targeted."
National Bureau of Economic Research
Kargar, Mahyar; Lester, Benjamin; Lindsay, David . . .
2020-06
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Inflation with COVID Consumption Baskets
From the Abstract: "The Covid-19 [coronavirus disease 2019] Pandemic has led to changes in consumer expenditure patterns that can introduce significant bias in the measurement of inflation. I use data collected from credit and debit transactions in the US to update the official basket weights and estimate the impact on the Consumer Price Index (CPI). I find that the Covid inflation rate is higher than the official CPI in the US, for both headline and core indices. I also find similar results with Covid baskets in 10 out of 16 additional countries. The difference is significant and growing over time, as social distancing rules and behaviors are making consumers spend relatively more on food and other categories with rising inflation, and relatively less on transportation and other categories experiencing significant deflation."
National Bureau of Economic Research
Cavallo, Alberto
2020-06
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Corporate Hiring Under COVID-19: Labor Market Concentration, Downskilling, and Income Inequality
From the Abstract: "Big data on job-vacancy postings reveal several dimensions of the impact of COVID-19 [coronavirus disease 2019] on the U.S. job market. Firms have cut back on postings for high-skill jobs more than for low-skill jobs, with small firms nearly halting their new hiring altogether. New-hiring cuts and downskilling are most pronounced in local labor markets lacking depth (where employment is concentrated within a few firms), in low-income areas, and in areas with greater income inequality. Cuts are deeper in industries where workers are more unionized and in the non-tradable sector. Access to finance modulates corporate hiring, with credit-constrained firms curtailing their job postings the most. Our study shows how the early-2020 global pandemic is shaping the dynamics of hiring, identifying the firms, jobs, places, industries, and labor markets most affected by it. Our results point to important challenges to the scale and speed of a recovery."
National Bureau of Economic Research
Campello, Murillo; Kankanhalli, Gaurav; Muthukrishnan, Pradeep
2020-05
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Wall Street vs. Main Street QE
From the Abstract: "The Federal Reserve has reacted swiftly to the COVID-19 [coronavirus disease 2019] pandemic. It has resuscitated many of its programs from the last crisis by lending to the financial sector, which we refer to as 'Wall Street QE.' The Fed is now proposing to also lend directly to, and purchase debt directly from, non-financial firms, which we label 'Main Street QE.' Our paper develops a new framework to compare and contrast these different policies. In a situation in which financial intermediary balance sheets are impaired, such as the Great Recession, Main Street and Wall Street QE are perfect substitutes and both stimulate aggregate demand. In contrast, for situations like the one we are now facing due to COVID-19, where the production sector is facing significant cash flow shortages, Wall Street QE becomes almost completely ineffective, whereas Main Street QE can be highly stimulative."
National Bureau of Economic Research
Sims, Eric R.; Wu, Jing Cynthia
2020-06
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Which Retail Outlets Generate the Most Physical Interactions?
From the Abstract: "This paper seeks to answer the simple question of what category of retail outlets generates the most physical interactions in the regular course of life. In this way, we aim to bring a marketing perspective to discussions about which businesses may be most risky from the standpoint of spreading contagious disease. We use detailed data from people's mobile devices prior to the implementation of social distancing measures in the United States. With this data, we examine a number of potential indicators of risk of contagion: The absolute number of visits and visitors, how many of the visits are generated by the same people, the median average distance traveled by the visitor to the retailer, and the number of customers from Canada and Mexico. We find that retailers with a single outlet tend to attract relatively few visitors, fewer one-off visitors, and have fewer international customers. For retailers that have multiple stores the patterns are non-linear. Retailers that have such a large number of stores that they are ubiquitous, tend to exhibit fewer visits and visitors and attract customers from a smaller distance. However, retailers that have a large enough footprint to be well known, but not large enough to be ubiquitous tend to attract a large number of visitors who make one-off visits, travel a long distance, and are disproportionately international."
National Bureau of Economic Research
Goldfarb, Avi; Tucker, Catherine (Catherine Elizabeth)
2020-04
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Bounding the Predictive Values of COVID-19 Antibody Tests
From the Abstract: "COVID-19 [coronavirus disease 2019] antibody tests have imperfect accuracy. There has been lack of clarity on the meaning of reported rates of false positives and false negatives. For risk assessment and clinical decision making, the rates of interest are the positive and negative predictive values of a test. Positive predictive value (PPV) is the chance that a person who tests positive has been infected. Negative predictive value (NPV) is the chance that someone who tests negative has not been infected. The medical literature regularly reports different statistics, sensitivity and specificity. Sensitivity is the chance that an infected person receives a positive test result. Specificity is the chance that a non-infected person receives a negative result. Knowledge of sensitivity and specificity permits one to predict the test result given a person's true infection status. These predictions are not directly relevant to risk assessment or clinical decisions, where one knows a test result and wants to predict whether a person has been infected. Given estimates of sensitivity and specificity, PPV and NPV can be derived if one knows the prevalence of the disease, the rate of illness in the population. There is considerable uncertainty about the prevalence of COVID-19. This paper addresses the problem of inference on the PPV and NPV of COVID-19 antibody tests given estimates of sensitivity and specificity and credible bounds on prevalence. I explain the methodological problem, show how to estimate bounds on PPV and NPV, and apply the findings to some tests authorized by the FDA."
National Bureau of Economic Research
Manski, Charles F.
2020-05
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Building Better Retirement Systems in the Wake of the Global Pandemic
From the Abstract: "In the wake of the global pandemic known as COVID-19 [coronavirus disease 2019], retirees, along with those hoping to retire someday, have been shocked into a new awareness of the need for better risk management tools to handle longevity and aging. This paper offers an assessment of the status quo prior to the spread of the coronavirus, evaluates how retirement systems are faring in the wake of the shock. Next we examine insurance and financial market products that may render retirement systems more resilient for the world's aging population. Finally, potential roles for policymakers are evaluated."
National Bureau of Economic Research
Mitchell, Olivia S.
2020-05
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Estimating and Forecasting Disease Scenarios for COVID-19 with an SIR Model
From the Abstract: "This paper presents a procedure for estimating and forecasting disease scenarios for COVID-19 [coronavirus disease 2019] using a structural SIR [susceptible-infected-recovered] model of the pandemic. Our procedure combines the flexibility of noteworthy reduced-form approaches for estimating the progression of the COVID-19 pandemic to date with the benefits of a simple SIR structural model for interpreting these estimates and constructing forecast and counterfactual scenarios. We present forecast scenarios for a devastating second wave of the pandemic as well as for a long and slow continuation of current levels of infections and daily deaths. In our counterfactual scenarios, we find that there is no clear answer to the question of whether earlier mitigation measures would have reduced the long run cumulative death toll from this disease. In some cases, we find that it would have, but in other cases, we find the opposite -- earlier mitigation would have led to a higher long-run death toll."
National Bureau of Economic Research
Atkeson, Andrew; Kopecky, Karen A.; Zha, Tao
2020-06
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Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis
From the Abstract: "In March of 2020, banks faced the largest increase in liquidity demands ever observed. Firms drew funds on a massive scale from pre-existing credit lines and loan commitments in anticipation of cash flow disruptions from the economic shutdown designed to contain the COVID-19 [coronavirus disease 2019] crisis. The increase in liquidity demands was concentrated at the largest banks, who serve the largest firms. Pre-crisis financial condition did not limit banks' liquidity supply. Coincident inflows of funds to banks from both the Federal Reserve's liquidity injection programs and from depositors, along with strong pre-shock bank capital, explain why banks were able to accommodate these liquidity demands."
National Bureau of Economic Research
Li, Lei; Strahan, Philip E. (Philip Elliot), 1963-; Zhang, Song
2020-05
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Event Study of COVID-19 Central Bank Quantitative Easing in Advanced and Emerging Economies
From the Abstract: "Amid the COVID-19 [coronavirus disease 2019] outbreak and related expected economic downturn, many developed and emerging market central banks around the world engaged in new long-term asset purchase programs, or so-called quantitative easing (QE) interventions. This paper conducts an event-study analysis of 24 COVID-19 QE announcements made by 21 global central banks on their local 10- year government bond yields. We find that the average developed market QE announcement had a statistically significant -0.14%1-day impact, which is slightly smaller than past interventions during the Great Recession era. In contrast, the average impact of emerging market QE announcements was significantly larger, averaging -0.28%and -0.43% over 1-day and 3-day windows, respectively. Across developed and emerging bond markets, we estimate an overall average 1-day impact of -0.23%. We also show that all 10-year government bond yields in our sample rose sharply in mid-March 2020, but fell substantially after the period of QE announcements that we study in the paper."
National Bureau of Economic Research
Hartley, Jonathan S.; Rebucci, Alessandro
2020-06
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Monetary and Fiscal Policies in Times of Large Debt: Unity is Strength
From the Abstract: "The COVID [coronavirus disease] pandemic found policymakers facing constraints on their ability to react to an exceptionally large negative shock. The current low interest rate environment limits the tools the central bank can use to stabilize the economy, while the large public debt curtails the efficacy of fiscal interventions by inducing expectations of costly fiscal adjustments. Against this background, we study the implications of a coordinated fiscal and monetary strategy aiming at creating a controlled rise of inflation to wear away a targeted fraction of debt. Under this coordinated strategy, the fiscal authority introduces an emergency budget with no provisions on how it will be balanced, while the monetary authority tolerates a temporary increase in inflation to accommodate the emergency budget. In our model the coordinated strategy enhances the efficacy of the fiscal stimulus planned in response to the COVID pandemic and allows the Federal Reserve to correct a prolonged period of below-target inflation. The strategy results in only moderate levels of inflation by separating long-run fiscal sustainability from a short-run policy intervention."
National Bureau of Economic Research
Bianchi, Francesco, 1980-; Faccini, Renato; Melosi, Leonardo
2020-05
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Estimating and Simulating a SIRD Model of COVID-19 for Many Countries, States, and Cities
From the Abstract: "We use data on deaths in New York City, Madrid, Stockholm, and other world cities as well as in various U.S. states and various countries and regions to estimate a standard epidemiological model of COVID-19 [coronavirus disease 2019]. We allow for a time-varying contact rate in order to capture behavioral and policy-induced changes associated with social distancing. We simulate the model forward to consider possible futures for various countries, states, and cities, including the potential impact of herd immunity on re-opening. Our current baselinemortality [sic] rate (IFR) is assumed to be 1.0% but we recognize there is substantial uncertainty about this number. Our model fits the death data equally well with alternative mortality rates of 0.5% or 1.2%, so this parameter is unidentified in our data. However, its value matters enormously for the extent to which various places can relax social distancing without spurring a resurgence of deaths."
National Bureau of Economic Research
Fernández-Villaverde, Jesús; Jones, Charles I. (Charles Irving)
2020-06
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Paying it Backward and Forward: Expanding Access to Convalescent Plasma Therapy Through Market Design
From the Abstract: "COVID-19 [coronavirus disease 2019] convalescent plasma (CCP) therapy is currently a leading treatment for COVID-19. At present, there is a shortage of CCP relative to demand. We develop and analyze a model of centralized CCP allocation that incorporates both donation and distribution. In order to increase CCP supply, we introduce a mechanism that utilizes two incentive schemes, respectively based on principles of 'paying it backward' and 'paying it forward.' Under the first scheme, CCP donors obtain treatment vouchers that can be transferred to patients of their choosing. Under the latter scheme, patients obtain priority for CCP therapy in exchange for a future pledge to donate CCP if possible. We show that in steady-state, both principles generally increase overall treatment rates for all patients--not just those who are voucher-prioritized or pledged to donate. Our results also hold under certain conditions if a fraction of CCP is reserved for patients who participate in clinical trials. Finally, we examine the implications of pooling blood types on the efficiency and equity of CCP distribution."
National Bureau of Economic Research
Kominers, Scott Duke; Pathak, Parag A.; Sönmez, Tayfun . . .
2020-05
