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The COVID-19 Fiscal Multiplier: Lessons from the Great Recession
The United States enacted a series of fiscal relief and stimulus bills in recent weeks, centered around the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The current fiscal response shares key similarities to the fiscal stimulus enacted during the Great Recession. Research over the past 10 years on the macroeconomic impact of that stimulus thus has important implications for the current fiscal response. The results point to a large potential impact on GDP.
An Unemployment Crisis after the Onset of COVID-19
The COVID-19 pandemic has upended the U.S. labor market, with massive job losses and a spike in unemployment to its highest level since the Great Depression. How long unemployment will remain at crisis levels is highly uncertain and will depend on the speed and success of coronavirus containment measures. Historical patterns of monthly flows in and out of unemployment, adjusted for unique aspects of the coronavirus economy, can help in assessing potential paths of unemployment. Unless hiring rises to unprecedented levels, unemployment could remain severely elevated well into next year.
Market Assessment of COVID-19
News about the COVID-19 public health crisis has affected asset prices to varying degrees across sectors of the U.S. economy. Stocks in the utilities, real estate, and energy sectors initially suffered the worst sector-specific shocks, while the information technology, health-care, and telecommunications sectors fared relatively better. Businesses with higher financial leverage saw larger declines in their valuations. A simultaneous repricing of credit derivatives suggests concerns about insolvency contributed to the valuation declines. Although some stocks are recovering from the initial ...