Working Paper

The Economic Impact of COVID-19 around the World

Abstract: For over two years, the world has been battling the health and economic consequences of the COVID-19 pandemic. This paper provides an account of the worldwide economic impact of the COVID-19 shock, measured by GDP growth, employment, government spending, monetary policy, and trade. We find that the COVID-19 shock severely impacted output growth and employment in 2020, particularly in middle-income countries. The government response, mainly consisting of increased expenditure, implied a rise in debt levels. Advanced countries, having easier access to credit markets, experienced the highest increase in indebtedness. All regions also relied on monetary policy to support the fiscal expansion. The specific circumstances surrounding the COVID-19 shock implied that the expansionary fiscal and monetary policies did not put upward pressure on prices until 2021. We also find that the adverse effects of the COVID-19 shock on output and prices have been significant and persistent, especially in emerging and developing countries.

Keywords: COVID-19; government debt; fiscal policy; monetary policy; emerging markets; inflation; international trade; employment;

JEL Classification: E52; E62; F34; F41; G15;

https://doi.org/10.20955/wp.2022.030

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2022-09

Number: 2022-030