Saving lives and the economy: the role of fiscal policy in the Covid-19 recession
Laura Carvalho - University of Sao Paulo
The Institute of Economics will hold a seminar meeting as part of its Seminar Series on Tuesday, November 2, 2021: Laura Carvalho from the University of Sao Paulo will present the paper "Saving lives and the economy: the role of fiscal policy in the Covid-19 recession".
Since the beginning of the COVID-19 pandemic, many countries have had intense debates over how to combine the necessary social distancing and health measures along with the economic response. This study takes a step forward by estimating the impact of the government responses on the economic performance of a group of countries worldwide in 2020. Gathering information from the OECD weekly tracker of economic activity, The Oxford COVID-19 Government Response Tracker, and Google Mobility, we built a comprehensive dataset for 45 countries in 2020 and 2021. By estimating two-way fixed effects, our results suggest that fiscal stimuli were very significant in mitigating the recession. The potential short-term negative impact on GDP, resulting from the necessary social distancing and restrictions on production, could be more than offset by an active fiscal policy and a commitment by public managers to health policies. In particular, the budgetary effort measure, which includes expenditures aimed at preserving family income and providing relief to companies, is the only variable that, regardless of the specification used in the model, has a positive and significant effect on the GDP projections variation. The results indicate that, during the pandemic, an expansion of 1% in public spending in relation to GDP promoted an increase in the weekly OECD economic activity measure around 1% concerning its initial value.
The seminar will be held in blended mode. In person participation is possible and available seats are allocated on a first come first served basis. For online participation please use the following link.