Entering the Pandemic Recession, we study the high-frequency real-activity signals provided by a leading nowcast, the ADS Index of Business Conditions produced and released in real-time by the Federal Reserve Bank of Philadelphia. Â We track the evolution of real-time vintage beliefs and compare them to a later-vintage chronology. Â Real-time ADS plunges and then swings as its underlying economic indicators swing, but the ADS paths quickly converge to indicate a return to brisk positive growth by mid-May. We show, moreover, that the daily real activity path was extremely highly correlated with the daily COVID-19 path. Â Finally, we provide a comparative assessment of the real-time ADS signals provided when exiting the Great Recession.
Diebold, F (2020), ‘Real-Time Real Economic Activity Entering the Pandemic Recession‘, COVID Economics 62, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-62#392514_392938_390683
We study the role of electoral politics in government small business lending, employment, and business formation. We construct novel measures of electoral importance capturing swing and base voters using data from Facebook ad spending, independent political expenditures, the Cook Political Report, and campaign contributions. We find that businesses in electorally important states, districts, and sectors receive more loans following the onset of the Covid-19 crisis, controlling for funding demand and both health and economic conditions. Estimates from survey and observational data show that government funding weakens the adverse effects of the crisis on employment, small business activity, and business applications.
Duchin, R and J Hackney (2020), ‘Buying the Vote? The Economics of Electoral Politics and Small Business Loans‘, COVID Economics 62, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-62#392514_392938_390684
The paper updates the results in GÃ³mez-Pineda (2020) about the depth, length and shape of the covid-19 recession using information up to the December-2020 forecast vintage. The method is a decomposition of output between potential output and the output gap, the former explained by supply shocks and the later, by demand shocks. We find that, compared to the July-2020 forecast vintage, in the December-2020 forecast vintage the median depth of the recession improved 1.1 percentage points in advanced economies while deteriorated 2.3 percentage points in emerging and developing economies. This change in the outlook may be explained by the increase in the prevalence of the disease in the second half of 2020 in emerging and developing economies as well as by the more limited reach of monetary and fiscal policies in emerging and developing economies. The recession is still V-shaped with partial recovery in advanced economies and L-shaped in emerging and developing economies. The results point to the relevance and urgency of policies to support emerging and developing economies.
Gomez-Pineda, J (2020), ‘Growth forecasts and the Covid-19 recession they convey: end-2020 update‘, COVID Economics 62, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-62#392514_392938_390685
We analyse â€˜stop-and-goâ€™ containment policies which produce infection cycles as periods of tight lock-downs are followed by periods of falling infection rates, which then lead to a relaxation of containment measures, allowing cases to increase again until another lock-down is imposed. The policies followed by several European countries seem to fit this pattern. We show that â€™stop-and-goâ€™ should lead to lower medical costs than keeping infections at the midpoint between the highs and lows produced by â€™stop-and-goâ€™. Increasing the upper and reducing the lower limits of a stop-and-go policy by the same amount would lower the average medical load. But, increasing the upper and lowering the lower limit while keeping the geometric average constant would have the opposite impact. We also show that with economic costs proportional to containment, any path that brings infections back to the original level (technically a closed cycle) has the same overall economic cost.
Gros, C and D Gros (2020), ‘The economics of stop-and-go epidemic control‘, COVID Economics 62, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-62#392514_392938_390686
We document households' spending responses to a stimulus payment in Japan during the COVID-19 pandemic. The Japanese Government launched a universal cash entitlement program offering a sizable lump sum of money to all residents to alleviate the financial burden of the pandemic on households. The timings of cash deposits varied substantially across households due to unexpected delays in administrative procedures. Using a unique panel of 2.8 million bank accounts, we find an immediate jump in spending during the week of payments, followed by moderately elevated levels of spending that persist for more than a month. The implied marginal propensity to consume is 0.49 within 6 weeks. We also document sizable heterogeneity in consumption responses by recipients' financial status and demographic characteristics. In particular, liquid asset holdings play a more crucial role than total asset holdings, suggesting the importance of the wealthy hand-to-mouth.
Kubota, S, K Onishi and Y Toyama (2020), ‘Consumption Responses to COVID-19 Payments: Evidence from a Natural Experiment and Bank Account Data‘, COVID Economics 62, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-62#392514_392938_390687
The COVID-19 pandemic has had a dramatic effect on women's labor market outcomes. We assess the effects of state-level policies that mandated the closure of child care centers or imposed class size restrictions using a triple-differences approach that exploits variation across states, across time, and across women who did and did not have young children who could have been affected. We find some evidence that both of these policies increase the unemployment rate of mothers of young children in the short term. In the long-term, the effects of mandated closures on unemployment become even larger and persist even after states discontinue closures, consistent with a permanent child care supply side effect.
Russell, L and C Sun (2020), ‘The Effect of Mandatory Child Care Center Closures on Women's Labor Market Outcomes During the COVID-19 Pandemic‘, COVID Economics 62, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-62#392514_392938_390688
This study explores the link between regular grandparental child care and Sars-CoV-2 infection rates at the level of German counties. In our analysis, we suggest that a regionâ€™s infection rates are shaped by region-, household- as well as individual-specific parameters. We extensively draw on the latter, exploring the inner- and outer-family mechanisms fueling individual contact frequency to test the potential role of regular grandparental child care in explaining overall infection rates. We combine aggregate survey data with local administrative data for German counties and find a positive correlation between the frequency of regular grandparental child care and local Sars-CoV-2 infection rates. However, statistical significance of this relationship breaks down as soon as potentially confounding factors, in particular the local Catholic population share, are controlled for. Our findings do not provide valid support for a significant role of grandparental child care in driving Sars-CoV-2 infections and rather suggest that the frequency of outer-family contacts driven by religious communities might be a more relevant channel in this context. Our results cast doubt on simplistic narratives postulating a link between intergenerational contacts and infection rates.
Boll, C and T Nikolka (2020), ‘Rightly blamed the ‘bad guy’? Grandparental child care and Covid-19‘, COVID Economics 62, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-62#392514_392938_390814