DP15087 The Economic Effects of COVID-19 Containment Measures

Author(s): Pragyan Deb, Davide Furceri, Jonathan D. Ostry, Nour Tawk
Publication Date: July 2020
Keyword(s): containment measures, COVID-19, Pandemics
JEL(s): D43, E52, E58, L11
Programme Areas: Public Economics, Development Economics, International Macroeconomics and Finance, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15087

Containment measures are crucial to halt the spread of the 2019 COVID-19 pandemic but entail large short-term economic costs. This paper tries to quantify these effects using daily global data on real-time containment measures and indicators of economic activity such as Nitrogen Dioxide (NO2) emissions, flights, energy consumption, maritime trade, and mobility indices. Results suggest that containment measures have had, on average, a very large impact on economic activity - equivalent to a loss of about 15 percent in industrial production over a 30-day period following their implementation. Using novel data on fiscal and monetary policy measures used in response to the crisis, we find that these policy measures were effective in mitigating some of these economic costs. We also find that while workplace closures and stayat- home orders are more effective in curbing infections, they are associated with the largest economic costs. Finally, while easing of containment measures has led to a pickup in economic activity, the effect has been lower (in absolute value) than that from the tightening of measures.