We study the effect of COVID-19 containment measures on expected stock price volatility in some advanced economies, using event studies with hand-collected minute-level data and panel regressions with daily data. We find that six-month-ahead volatility indices dropped following announcements of initial or re-imposed lockdowns and that they did not drop significantly following the easing of lockdowns. Such patterns are not as strong for three-month-ahead expected volatility and generally absent for one-month-ahead expected volatility. These results provide suggestive evidence for the existence of an intertemporal trade-off: although stringent containment measures cause short-term economic disruptions, they may reduce medium-term uncertainty (reflected in expected stock volatility) by boosting markets’ confidence that the outbreak would be under control more quickly.
Acharya, V, Y Liu and Y Zhao (2021), ‘COVID-19 Containment Measures and Expected Stock Volatility: High-Frequency Evidence from Selected Advanced Economies‘, COVID Economics 79, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-79#392514_392955_390771
Externalities and private information are key characteristics of an epidemic like the Covid-19 pandemic. We study the welfare costs stemming from the incomplete information environment that these characteristics foster. We develop a framework that embeds a game theory approach into a macro SIR model to analyze the role of information in determining the extent of the health-economy trade-off of a pandemic. We apply the model to the Covid-19 epidemic in the US and find that the costs of keeping health information private are between USD $5.9$ trillion and USD $6.7$ trillion. We then find an optimal policy of disclosure and divulgation that, combined with testing and containment measures, can improve welfare. Since it is private information about individuals' health what produces the greatest welfare losses, finding ways to make such information known as precisely as possible, would result in significantly fewer deaths and significantly higher economic activity.
Forero-Alvarado, S, N Moreno-Arias and J Ospina-Tejeiro (2021), ‘Humans Against Virus or Humans Against Humans: A Game Theory Approach to the COVID-19 Pandemic‘, COVID Economics 79, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-79#392514_392955_390774
This paper models the current pandemic to analyze vaccination strategies in a setting with three age groups that differ with respect to their fatality rates. The model also accounts for heterogeneity in the transmission rates between and within these age groups. We compare the outcomes in terms of the total number of deceased, the total number of infected, the peak infection rate and the economic consequences. We find that fatalities are almost always minimized by first vaccinating the elderly, except when vaccination is slow and the general transmission rate is relatively low. In this case deaths are minimized by first vaccinating the middle-aged as this group is responsible for substantial spreading of the virus to the elderly. With regard to the other outcome variables it is always best to vaccinate the middle-aged group first. A trade-off may therefore emerge between reducing fatalities on the one hand and lowering the number of infected as well as maximizing the economic gains from vaccinations on the other hand.
Forslid, R and M Herzing (2021), ‘Who to vaccinate first: Some important trade-offs‘, COVID Economics 79, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-79#392514_392955_408812
What are the effects of school and daycare facility closures during the COVID-19 pandemic on parental well-being and parenting behavior? Can emergency childcare policies during a pandemic mitigate increases in parental stress and negative parenting behavior? To answer these questions, this study leverages cross-state variation in emergency childcare eligibility rules during the first COVID-19 lockdown in Germany and draws on unique data from the 2019 and 2020 waves of the German AID: A family panel. Employing a DDD and IV approach we identify medium-term ITT and LATE effects and find that while emergency care policies did not considerably affect parents’ life satisfaction, partnership satisfaction or mental health, they have been effective in diminishing harsh parenting behavior. We find partly gendered effects, specifically on paternal parenting behavior. Our results suggest that decreasing parental well-being likely constitutes a general effect of the pandemic, whereas the observed increase in negative and potentially harmful parenting behavior is largely directly caused by school and daycare facility closures.
Schüller, S and H Steinberg (2021), ‘Parents under Stress – Evaluating Emergency Childcare Policies during the first COVID-19 Lockdown in Germany‘, COVID Economics 79, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-79#392514_392955_390772
University students have been particularly affected by the COVID-19 pandemic. We present results from the first wave of the Global COVID-19 Student Survey, which was administered at 28 universities in the United States, Spain, Australia, Sweden, Austria, Italy, and Mexico between April and October 2020. The survey addresses contemporaneous outcomes and future expectations regarding three fundamental aspects of students’ lives in the pandemic: the labor market, education, and health. We document the differential responses of students as a function of their country of residence, parental income, gender, and for the US their race.
Almunia, M, M Alston, J Arellano-Bover, S Becker, P Beneito, R Böheim, J Boscá, J Brown, S Chang, S Danagoulian, , M Eckrote-Nordland, L Farre, J Ferri, M Fort, R Gelding, A Goodman, J Hankin, S Imberman, D Jaeger, K Karbownik, J Lahey, J Llull, M Martínez-Matute, I McFarlin, J Merilainen, T Mortlund, J Nunley, M Nybom, R Sausgruber, A Schwarz, A Seals, J Stuhler, P Thiemann and M Zhu (2021), ‘The Global COVID-19 Student Survey: First Wave Result‘, COVID Economics 79, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-79#392514_392955_390773
Have the content, sentiment, and timing of the Federal Reserve (Fed) communications changed across communication types during the COVID-19 pandemic? Did similar changes occur during the global financial and dot-com crises? We compile dictionaries specific to COVID-19 and unconventional monetary policy (UMP) and utilize sentiment analysis and topic modelling to study the Fed’s communications and answer the above questions. We show that the Fed’s communications regarding the COVID-19 pandemic concern matters of financial volatility, contextual uncertainty, and financial stability, and that they emphasize health, social welfare, and UMP. We also show that the Fed’s communication policy changes drastically during the COVID-19 pandemic compared to the GFC and dot-com crisis in terms of content, sentiment, and timing. Specifically, we find that during the past two decades, a decrease in the financial stability sentiment conveyed by the Fed’s interest rate announcements and minutes precedes a decrease in the Fed’s interest rate.
Benchimol, J, S Kazinnik and Y Saadon (2021), ‘Federal Reserve Communication and the COVID-19 Pandemic‘, COVID Economics 79, CEPR Press, Paris & London. https://cepr.org/publications/covid-economics-issue-79#392514_392955_390770