Measuring the effectiveness of US monetary policy during the COVID-19 recession

The COVID-19 recession that started in March 2020 led to an unprecedented decline in economic activity across the globe. To fight this recession, policy makers in central banks engaged in expansionary monetary policy. This paper asks whether the measures adopted by the US Federal Reserve (Fed) have been effective in boosting real activity and calming financial markets. To measure these effects at high frequencies, we propose a novel mixed frequency vector autoregressive (MF-VAR) model. This model allows us to combine weekly and monthly information within a unified framework. Our model combines a set of macroeconomic aggregates such as industrial production, unemployment rates, and inflation with high-frequency information from financial markets such as stock prices, interest rate spreads, and weekly information on the Fed's balance sheet size. The latter set of high-frequency time series is used to dynamically interpolate the monthly time series to obtain weekly macroeconomic measures. We use this setup to simulate counterfactuals in absence of monetary stimulus. The results show that the monetary expansion caused higher output growth and stock market returns, more favorable long-term financing conditions and a depreciation of the US dollar compared with a no-policy benchmark scenario.     

精准把握世界经济发展形势

2020年,突如其来的新冠肺炎疫情肆虐全球,世界经济陷入第二次世界大战以来最严重的衰退,经济全球化遭受巨大冲击。展望2021年,大振荡后的世界经济将呈现恢复性增长,但各经济体的发展不尽相同,世纪疫情更对世界经济产生了广泛而又深远的影响。     

The great Canadian recovery: The impact of COVID-19 on Canada's labour market

The Canadian labour market experienced a period of unprecedented turmoil following the onset of the COVID-19 pandemic. We analyze the main changes using standard labour force statistics and new data on job postings. Envisaging a phase of temporary severing of employment relationships followed by a phase of more standard labour market search and matching, we use stock and flow data to understand key developments. We find dramatic changes in employment, unemployment and labour market attachment in the first few months of the pandemic and a broad though gradual recovery through to the end of 2021.     

Health and Public Health Implications of COVID-19 in Asian Countries

This paper discusses the impacts of the COVID-19 pandemic on population health in Asian countries. Compared to European countries, Asian countries, in general, experienced much fewer COVID-19 cases and deaths. The underlying factors in this difference would include the earlier and more stringent nonpharmaceutical interventions, differences in the age structure, the geographical characteristics in Asia, and the experience of past outbreaks of emerging diseases, though further studies are needed to investigate the exact mechanisms. Still, regarding the aim of developing resilient health care systems, there remain several lessons from the COVID-19 pandemic experience in Asian countries that could inform more effective management of future pandemics.     

Support for bigger government: The principle-implementation gap and COVID-19

We study the COVID-19 pandemic's effect on government and market attitudes using within-subject comparisons of survey responses elicited before and after the onset of the pandemic. We find that participants develop significantly less favorable opinions toward government and markets; and that participants increase support for bigger government significantly and for redistribution, in general, marginally significantly. There is no evidence this leads to an increase in support for specific redistributive policies, nor for government to play a larger role in specific functions. Our results echo the stubbornness of American preferences for redistribution and suggest the presence of a principle-implementation gap.     

The welfare implications of COVID-19 for fragile and conflict-affected regions

Understanding the ramifications of the COVID-19 pandemic for households' welfare in regions subject to fragility, conflict, and violence (FCV) is important to inform programs and policies in this context. Harmonized data from high-frequency phone surveys indicates that, at the onset of the pandemic, a higher fraction of respondents in FCV regions relative to non-FCV ones faced adverse household income changes and reported to have stopped working since the outbreak of the crisis. On top of that, households in FCV regions were far less likely to have received government assistance than those in non-FCV regions. These findings suggest that, at the start of the COVID-19 pandemic, there was a widening of the preexisting economic gap between FCV and non-FCV regions, raising the recovery bar for the former.     

The Australian Labour Market and the Early Impact of COVID-19: An Assessment

From March to June 2020 was the most dramatic four months in the history of the Australian labour market. Never before has a such a substantial decrease in labour demand (and partial reversal) occurred so quickly. In this article, we present an overview of the early impact of COVID-19: the main drivers it brought into play and the consequent labour market developments. Aggregate effects and how impacts differed by type of job and worker are described. We conclude with a brief review of the main government response to COVID-19, the JobKeeper program.     

The effects of COVID-19 containment measures on the Asia-Pacific region

As the COVID-19 pandemic spread across the world, governments introduced significant containment measures to control the spread of the virus. In this paper, we leverage inputs from IMF desk economists to construct a novel narrative index of containment measures for 11 countries in the Asia-Pacific region. A key innovation in our index is that it distinguishes between economic sectors (services, industry, retail), thus providing a more granular view of restrictions related to economic activity. Using this index, along with other high-frequency data, we find that containment measures have been successful in reducing the spread of the virus (though with some heterogeneity) but have also been associated with large short-term economic costs. Furthermore, exploiting the granularity of our index, we find that differences in strategies across countries regarding the closing of the industrial sector have mattered: imposing less severe restrictions on industry has been associated with lower economic costs without leading to worse health outcomes, possibly reflecting the less contact intensive nature of industrial activity.     

The Australian Economy in 2020–21: The COVID-19 Pandemic and Prospects for Economic Recovery

This article summarises developments in the Australian economy in 2020. It describes the economic growth and labour market ramifications associated with COVID-19, and the fiscal and monetary policies implemented to help counter its effects. COVID-19 has resulted in considerable slack in an economy that was weak pre-pandemic. While current policies are appropriately focused on stimulating demand and supporting employment, existing challenges such as weak growth in productivity, gross domestic product and real wages are also likely to remain relevant post-pandemic.     

The impact of COVID-19 on seasoned equity offering: Evidence from China

This study examines the impact from the COVID-19 pandemic on the association between Chinese firms' SEO announcements and market reaction afterwards. Our findings indicate that market investors would respond more negatively to the SEO announcements and undergo more SEO underpricing for firms from regions significantly affected by the pandemic than those from the less-affected regions. Furthermore, higher CSR scores and more involvements in accounting conservatism could mitigate these effects. The main mechanism of the moderating effect from CSR performance and accounting conservatism is that CSR investment and accounting conservatism could lessen information asymmetry between the SEO announced firms and outside investors. Finally, we document that the main motivation of SEO issuance during the pandemic is market timing.     

Global models for a global pandemic: The impact of COVID-19 on small euro area economies

We analyse the COVID-19 pandemic shock on small open economies (SOEs) in the euro area in a unified modelling framework: the Euro Area and the Global Economy model. We find strong negative international spillovers affecting each of the modelled SOEs, stemming not only from the rest of the euro area, but also from the United States and the rest of the world. A lower bound on nominal interest rates in the euro area amplifies these spillovers, especially within the euro area. Furthermore, we find some positive spillovers from the fiscal measures implemented in the Euro area to combat the pandemic, including the new Next Generation EU instrument.     

The recession of 1990: An Austrian explanation

Conclusion Deficit spending and money-supply expansion do not eliminate recessions. Theycause recessions. This fact will never be understood unless economists and government policymakers stop trying to micro-manage the economy, and start studying what their actions are doing to the structure of production. Heavy inflation of the money supply followed by sharp cutbacks change the rules right in the middle of the game for millions of businesses in the economy. For the last 40 years, government expansionary policies have stimulated industries to create false and untenable investments. These policies are followed by government corrective actions that destroy those same projects—waste the billions of dollars invested in them, and throw millions out of work. Business cycles are not an essential feature of market capitalism. They are the result of government interference with the market. In the misdirection of labor and the distortion of the structure of production during past business cycles, it was fairly easy to point to the places where the excessive expansion had occurred because it was, on the whole, confined to the capital goods industries... In contrast, the present expansion of money, which has been brought about partly by means of bank credit expansion and partly through budget deficits, has been the result of a deliberate policy, and has gone through somewhat different channels... I do not doubt that in a sense we have today the same kind of phenomenon, but the over-expansion, the undue increase of labor employed in particular occupations, is not confined to a single, clearly defined block such as the capital-goods industries. It is now spread much more widely, and the distribution is much more difficult to describe. It is a field I would wish some statistically minded economist would investigate in order to show how the process operated in particular countries. Friedrich A. Hayek     

Macroeconomic effects of COVID-19: A mid-term review*

This article provides an interim assessment of the macroeconomic consequences of the COVID-19 pandemic. Estimates suggest a median output loss of approximately 6.5% in 2020, a gap that is expected to narrow to around 4% of the pre-pandemic trend by the end of 2021. There is, however, a high dispersion of economic losses across economies, reflecting varying exposures to the pandemic and societies' responses. High-frequency indicators and epidemiological models provide some insight into the interactions between the pandemic evolution and societies' strategies for combating it, including the role of vaccination. The article draws lessons from experiences thus far and discusses challenges ahead.     

The sooner,the better: The economic impact of non-pharmaceutical interventions during the early stage of the COVID-19 pandemic

This paper estimates the economic impact of the non-pharmaceutical interventions (NPIs) implemented by countries in Europe and Central Asia during the initial stages of the COVID-19 pandemic. The analysis relies on daily electricity consumption, nitrogen dioxide emission and mobility records to trace the economic disruptions caused by the pandemic and calibrate these measures to estimate the magnitude of the economic impact. To address the potential endogeneity in the introduction of NPIs, we instrument their stringency by the extent of a country's social ties to China. The results suggest that the NPIs led to a decline of about 10% in economic activity across the region. On average, countries that implemented non-pharmaceutical interventions in the early stages of the pandemic appear to have better short-term economic outcomes and lower cumulative mortality, compared with countries that imposed non-pharmaceutical interventions during the later stages of the pandemic. Moreover, there is evidence that COVID-19 mortality at the peak of the local outbreak has been lower in countries that acted earlier. In this sense, the results suggest that the sooner non-pharmaceutical interventions are implemented, the better are the economic and health outcomes.     

On the economic impacts of COVID-19: A text mining literature analysis

The COVID-19 outbreak has affected everyday lives worldwide. As governments started to implement confinement and business closure measures, the economic impact was felt by entire societies immediately. The urgency of such a theme has led researchers to study the phenomenon. Accordingly, the purpose of this research is to provide the state of the art on relevant dimensions and hot topics of research to understand the economic impacts of COVID-19. In this survey, we conduct a text mining analysis of 301 articles published during 2020 which analyzed such economic impacts. By defining a set of relevant dimensions grounded on existing literature, we were able to extract a set of coherent topics that aggregate the collected articles, characterized by the predominance of a few sets of dimensions. We found that the impact on “financial markets” was widely studied, especially in relation to Asia. Next, we found a more diverse range of themes analyzed in Europe, from “government measures” to “macroeconomic variables.” We also discovered that America has not received the same degree of attention, and “institutions,” “Africa,” or “other pandemics” were studied less. We anticipate that future research will proliferate focusing on several themes, from environmental issues to the effectiveness of government measures.     

Adapting to the new normal: A sustainable livelihood framework for the informal sectors during COVID-19

The extraordinary COVID-19 outbreak has heightened the existential dangers to the informal sector. This study explores the informal sector's tactics in Vietnam for mitigating the pandemic's effects and better adapting to the new normal. Using a sustainable livelihood approach (SLA) and multivariate model for ordered choices (MVOC) to conduct surveys on 513 subjects from the informal labor, our findings indicate that financial management is the most prevalent technique for mitigating the effects of COVID-19. Notably, the perception of the COVID-19 pandemic's impact on income and health is crucial to the adoption of mitigation efforts. The Vietnamese government, State Bank, and financial institutions should provide more help to the informal sector, particularly those operating in remote locations so that they can increase their resilience through mitigating measures. In parallel, the informal sector should participate in more deliberate forward mitigation planning in the anticipation of inevitable future shocks.     

结构性冲击对中国经济的影响——兼论新冠肺炎疫情的经济影响

传染性疾病作为一种短暂而剧烈的结构性冲击对中国经济的影响以及政策选择因全球爆发的新冠肺炎疫情受到广泛关注.基于包含上下游生产结构、不同类型企业以及异质性金融摩擦的动态随机一般均衡模型的研究发现,疫情冲击是对供给与需求同时产生影响的综合冲击,这一特征对评估其经济影响非常重要,并能解释疫情以来中国消费下滑幅度大于生产投资且恢复较慢的特征事实.结构性减税政策对经济的稳定效果显著优于宽松货币政策且福利损失更小,但两种政策组合使用可以带来更好的福利结果.这是因为货币扩张在稳定需求的同时恶化了信贷资源错配,结构性减税则部分纠正了信贷错配,而政策组合使用能充分发挥两种政策的优势.     

The stock market and NO2 emissions effects of COVID-19 around the world

In this paper, we study the impact of the coronavirus disease 2019 pandemic in estimated panel vector autoregression models for 92 countries. The large cross-section of countries allows us to shed light on the heterogeneity of the responses of stock markets and nitrogen dioxide emissions as high-frequency measures of economic activity. We quantify the effect of the number of infections and four dimensions of policy measures: (1) containment and closure, (2) movement restrictions, (3) economic support, and (4) adjustments of health systems. Our main findings show that a surprise increase in the number of infections triggers a drop in our two measures of economic activity. Propping up economic support measures, in contrast, raises stock returns and emissions and, thus, contributes to the economic recovery. We also document vast differences in the responses across subsets of countries and between the first and the second wave of infections.