Addressing the COVID-19 Crisis in Advanced Economies
The economic situation worsens, governments react, and the debate on reopening the economy continues amidst concerns about debt sustainability. Explore insights on needed fiscal responses and the challenges faced during the COVID-19 crisis in advanced economies.
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Panel: Addressing the COVID-19 Crisis Virtual 2020 MPA/ID Celebration Friday, May 8, 2020, 2-3:30pm The Advanced Economies Prof. Jeffrey Frankel, Harvard Kennedy School
Addressing the COVID-19 Crisis in the Advanced Economies 1. The economic situation gets worse & worse. 2. Governments reactions. 3. The current debate: re-opening the economy. 4. Those of us recommending sustained fiscal stimulus must address whether the implied debt paths are sustainable.
1. The economic situation gets worse & worse. Lost US Output Putting the Size of the Needed COVID-19 Fiscal Response in Perspective, CBPP, May 4, 2020 www.cbpp.org/research/federal-budget/putting-the-size-of-the-needed-covid-19-fiscal-response-in-perspective ,
2. Govt. reactions:2020 Fiscal response > 2009, esp. G7. FISCAL MONITOR: POLICIES TO SUPPORT PEOPLE DURING THE COVID-19 PANDEMIC, IMF, May 2020 Data sources: IMF 2009a; IMF 2009b; national authorities; and IMF staff estimates as of April 8, 2020. Panel 1 includes above-the-line spending and revenue measures only, weighted by GDP in PPP- adjusted current US dollars. Panel 2 adds below-the-line measures (loans, equity injections) and government guarantees to revenue and expenditure measures adopted in 2020. These are presented in the same panel for ease of reference but are not additive. The decomposition between loans and guarantees is based on available information as of April 8, 2020..
3. Time to re-open the economy? Deaths have barely peaked. Note: Excess mortality in 14 countries runs about 60% above reported Covid19 death tolls. www.ft.com/content/6bd88b7d-3386-4543-b2e9-0d5c6fac846c
4. Debt sustainability: A tradeoff between health & re-opening the economy is illusory but the tradeoff with debt sustainability is real. From The Economist April 30, 2020 www.economist.com/the-world-this-week/2020/04/30/kals-cartoon
