The Impact of Health and Economic Policies on the Spread of COVID-19 and Economic Activity

RePEc Short ID: ple692
ORCID iD: 0000-0002-0072-0441

Famiglietti, Matthew; Leibovici, Fernando

doi:10.20955/wp.2021.005

Working Paper

The Impact of Health and Economic Policies on the Spread of COVID-19 and Economic Activity

Abstract: This paper empirically investigates the causal linkages between COVID-19 spread, government health containment and economic support policies, and economic activity during 2020 in the U.S. We model their joint dynamics as generated by a structural vector autoregression and estimate it using U.S. state-level data. We identify structural shocks to the variables by making assumptions on their short-run relation consistent with salient epidemiological and economic features of COVID-19. We isolate the direct impact of COVID-19 spread and policy responses on economic activity by controlling for demand fluctuations using disaggregate exports data. We find that health containment and economic support policies are highly effective at curbing the spread of COVID-19 without leading to a long-term contraction of economic activity.

Keywords: COVID-19; Health Containment Policies; Non-Pharmaceutical Interventions; Pandemics; Economic Activity;

JEL Classification: E0; F1; I18;

https://doi.org/10.20955/wp.2021.005

Status: Published in European Economic Review