Economic Activity, Fiscal Space and Types of COVID-19 Containment Measures

January 28, 2022

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Format: Chicago

Amr Hosny, and Kevin Pallara. Economic Activity, Fiscal Space and Types of COVID-19 Containment Measures, (USA: International Monetary Fund, 2022) accessed November 21, 2024

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.

Summary

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.

Subject: COVID-19, Credit default swap, Fiscal policy, Fiscal space, Health, Money, Public debt

Keywords: CDS spread, Containment measure, Containment measures, COVID-19, COVID-19, Credit default swap, Europe, Fiscal measures, Fiscal space, Fiscal space, Global, IMF working papers, Infection case, Public health response time, Sovereign risk., Types of COVID-19 containment, Western Hemisphere

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/012
Stock No:

WPIEA2022012
ISBN:

9781616357214
ISSN:

1018-5941

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