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Economic Activity, Fiscal Space and Types of COVID-19 Containment Measures
Author:
Amr Hosny
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Kevin Pallara
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 012
Language:
English
Publication Date:
28 Jan 2022
DOI:
https://doi.org/10.5089/9781616357214.001
ISBN:
9781616357214
ISSN:
1018-5941
Pages:
49
Keywords:
COVID-19; fiscal measures; containment measures; fiscal space; sovereign risk.; containment measure; IMF working papers; public health response time; types of COVID-19 containment; CDS spread; infection case; Fiscal space; Credit default swap; COVID-19; Western Hemisphere; Global; Europe
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper argues that the type of COVID-19 containment measures affects the trade-offs between infection cases, economic activity and sovereign risk. Using local projection methods and a year and a half of high-frequency daily data covering 44 advanced and emerging economies, we find that smart (e.g. testing) as opposed to physical (e.g. lockdown) measures appear to be best placed to tackle these trade-offs. Initial conditions also matter whereby containment measures can be less disruptive when public health response time is fast and public debt is low. We also construct a database of daily fiscal announcements for Euro area countries, and find that sovereign risk is improved under a combination of large support packages and smart measures.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 012