COVID-19, POLICY RESPONSES, AND INDUSTRIAL PRODUCTIVITY AROUND THE GLOBE
Abstract
We examine whether the COVID-19-induced policy responses by countries moderated the negative impact of the pandemic on industrial productivity. Using a panel of the 50 most affected countries by the pandemic, we show that the policy responses do not only help reduce the spread of COVID-19, but they also moderate its negative impact on industrial productivity and help steer countries back to their growth paths. We demonstrate that, in the absence of the pandemic, some of the policy responses (i.e., lockdowns, travel restrictions, etc.) would have reduced productivity. We further demonstrate that our estimates are robust when considering alternative specifications of our productivity model. Our study provides strong support for evidence-based policies and emphasizes, consistent with theoretical arguments, that an optimal policy mix is fundamental to steering economies back to their steady productivity growth paths when facing negative shocks.
Downloads
References
Ashraf, B. N. (2020). Economic Impact of Government Interventions During the COVID-19 Pandemic: International Evidence from Financial Markets. Journal of Behavioral and Experimental Finance, 27, 100371.
https://doi.org/10.1016/j.jbef.2020.100371
Assenza, T., Collard, F., Dupaigne, M., Fève, P., Hellwig, C., Kankanamge, S., & Werquin, N. (2020). The Hammer and the Dance: Equilibrium and Optimal Policy During a Pandemic Crisis. Toulouse School of Economics. Accessed at http://publications.ut-capitole.fr/34924/1/wp_tse_1099.pdf
Baig, A. S., Butt, H. A., Haroon, O., & Rizvi, S. A. R. (2021). Deaths, Panic, Lockdowns and US Equity Markets: The Case of COVID-19 Pandemic. Finance Research Letters, 38, 101701. https://doi.org/10.1016/j.frl.2020.101701
Bannigidadmath, D., Narayan, P. K., Phan, D. H. B., & Gong, Q. (2021). How Stock Markets Reacted to COVID-19? Evidence from 25 Countries. Finance Research Letters, 102161. https://doi.org/10.1016/j.frl.2021.102161
Barro, R. J., Ursúa, J. F., & Weng, J. (2020). The Coronavirus and the Great Influenza Pandemic: Lessons from the “Spanish Flu” for the Coronavirus’s Potential Effects on Mortality and Economic Activity (No. w26866). National Bureau of Economic Research.
Basu, S., & Bundick, B. (2017). Uncertainty Shocks in a Model of Effective Demand. Econometrica, 85, 937-958.
Bauer, A., & Weber, E. (2021). COVID-19: How Much Unemployment was Caused by the Shutdown in Germany? Applied Economics Letters, 28, 1053-1058.
Behera, C., & Rath, B. N. (2021). The COVID-19 Pandemic and Indian Pharmaceutical Companies: An Event Study Analysis. Bulletin of Monetary Economics and Banking, Special Issue 2021, 1-14.
Bernanke, B. S. (1983). Irreversibility, Uncertainty, and Cyclical Investment. The Quarterly Journal of Economics, 98, 85-106.
Bernanke, B. S., Gertler, M., & Gilchrist, S. (1999). The Financial Accelerator In a Quantitative Business Cycle Framework. Handbook of Macroeconomics, 1, 1341-1393.
Bjørnland, H. C., & Leitemo, K. (2009). Identifying the Interdependence Between US Monetary Policy and the Stock Market. Journal of Monetary Economics, 56, 275-282.
Chan, K. H., Hayya, J. C., & Ord, J. K. (1977). A Note on Trend Removal Methods: The Case of Polynomial Regression Versus Variate Differencing. Econometrica, 45, 737-744.
Chen, C., Liu, L., & Zhao, N. (2020). Fear Sentiment, Uncertainty, and Bitcoin Price Dynamics: The Case of COVID-19. Emerging Markets Finance and Trade, 56, 2298–2309. https://doi.org/10.1080/1540496x.2020.1787150
Choi, S. Y. (2020). Industry Volatility and Economic Uncertainty Due to the COVID-19 Pandemic: Evidence from Wavelet Coherence Analysis. Finance Research Letters, 37, 101783.
Christiano, L. J., Motto, R., & Rostagno, M. (2014). Risk Shocks. American Economic Review, 104, 27-65.
Devpura, N., & Narayan, P. K. (2020). Hourly Oil Price Volatility: The Role of COVID-19. Energy Research Letters, 1, 13683. https://doi.org/10.46557/001c.13683
Feng, G. F., Yang, H. C., Gong, Q., & Chang, C. P. (2021). What is the Exchange Rate Volatility Response to COVID-19 and Government Interventions? Economic Analysis and Policy, 69, 705-719.
Giordani, P. (2004). An Alternative Explanation of the Price Puzzle. Journal of Monetary Economics, 51, 1271-1296.
Haldar, A., & Sethi, N. (2020). The News Effect of COVID-19 on Global Financial Market Volatility. Buletin Ekonomi Moneter dan Perbankan, 24, 33-58.
Haroon, O., and Rizvi, S. A. R., (2020) Flatten the Curve and Stock Market Liquidity—An Inquiry Into Emerging Economies. Emerging Markets Finance and Trade, 56, 2151-2161; https://doi.org/10.1080/1540496X.2020.1784716
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115, 53-74.
Iyke, B. N. (2020a). The Disease Outbreak Channel of Exchange Rate Return Predictability: Evidence from COVID-19. Emerging Markets Finance and Trade, 56, 2277-2297.
Iyke, B. N. (2020b). COVID-19: The Reaction of US Oil and Gas Producers to the Pandemic. Energy Research Letters, 1, 13912.
Iyke, B. N. (2020c). Economic Policy Uncertainty in Times of COVID-19 Pandemic. Asian Economics Letters, 1. https://doi.org/10.46557/001c.17665
Iyke, B. N., & Ho, S.-Y. (2021). Investor Attention on COVID-19 and African Stock Returns. MethodsX, 8, 101195. https://doi.org/10.1016/j.mex.2020.101195
Kahn, C. M., & Wagner, W. (2021). Liquidity Provision During a Pandemic. Journal of Banking & Finance, 106152. https://doi.org/10.1016/j.jbankfin.2021.106152
Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-sample Properties. Journal of Econometrics, 108, 1-24.
Liu, D., Sun, W., & Zhang, X. (2020). Is the Chinese Economy Well Positioned to Fight the COVID-19 Pandemic? The Financial Cycle Perspective. Emerging Markets Finance and Trade, 56, 2259-2276.
Mitman, K., & Rabinovich, S. (2020). Optimal Unemployment Benefits in the Pandemic. (June 2020). CEPR Discussion Paper No. DP14915, Available at SSRN: https://ssrn.com/abstract=3638019
Moser, C. A., & Yared, P. (2020). Pandemic Lockdown: The Role of Government Commitment (No. w27062). National Bureau of Economic Research.
Narayan, P. K. (2020). Oil Price News and COVID-19—Is There Any Connection? Energy Research Letters, 1, 13176. https://doi.org/10.46557/001c.13176
Padhan, R., & Prabheesh, K. P. (2021). The Economics of COVID-19 Pandemic: A Survey. Economic Analysis and Policy, 70, 220-237.
Phan, D. H. B., & Narayan, P. K. (2020). Country Responses and the Reaction of the Stock Market to COVID-19—A Preliminary Exposition. Emerging Markets Finance and Trade, 56, 2138-2150.
Salisu, A. A., & Akanni, L. O. (2020). Constructing a Global Fear Index for COVID-19 Pandemic. Emerging Markets Finance and Trade, 56, 2213–2230. https://doi.org/10.1080/1540496x.2020.1785424
Sha, Y., & Sharma, S. S. (2020). Research on Pandemics Special Issue of the Journal Emerging Markets Finance and Trade. https://doi.org/10.1080/1540496X.2020.1795467
Sharma, S.S., & Sha, Y., (2020) Part A: Special Section on COVID-19 Research, Emerging Markets Finance and Trade, 56, 3551-3553. https://doi.org/10.1080/1540496X.2020.1858617
Yang, H., & Deng, P. (2021). The Impact of COVID-19 and Government Intervention on Stock Markets of OECD Countries. Asian Economics Letters, 1, 18646. https://doi.org/10.46557/001c.18646
Yu, Z., Xiao, Y., & Li, Y. (2020). The Response of the Labor Force Participation Rate to an Epidemic: Evidence from a Cross-Country Analysis. Emerging Markets Finance and Trade, 56, 2390-2407
Zaremba, A., Kizys, R., & Aharon, D. Y. (2021). Volatility in International Sovereign Bond Markets: The Role of Government Policy Responses to the COVID-19 Pandemic. Finance Research Letters, 102011. https://doi.org/10.1016/j.frl.2021.102011
Copyright (c) 2021 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
