COVID-19 Vaccination and Financial Frictions

Abstract: We study the COVID-19 epidemic in emerging markets that face financial frictions and its mitigation through social distancing and vaccination. We find that restricted vaccine availability in emerging markets, as captured by limited quantities and high prices, renders the pandemic exceptionally costly compared to economies without financial frictions. Improved access to financial markets enables better response to the delay in vaccine supplies, as it supports more stringent social distancing measures prior to wider vaccine availability. We show that financial assistance programs to such financially constrained countries can increase vaccinations and lower fatalities, at no present-value cost to the international community.

Keywords: Fiscal space; Vaccination; Financial market conditions; COVID-19;

JEL Classification: I18; F41; F34;

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Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Staff Report

Publication Date: 2021-12-15

Number: 632