Pandemic Lockdown: The Role of Government Commitment

Christian Moser and Pierre Yared

MPRA Paper from University Library of Munich, Germany

Abstract: This note studies optimal lockdown policy in a model in which the government can limit a pandemic's impact via a lockdown at the cost of lower economic output. A government would like to commit to limit the extent of future lockdown in order to support more optimistic investor expectations in the present. However, such a commitment is not credible since investment decisions are sunk when the government makes the lockdown decision in the future. The commitment problem is more severe if lockdown is sufficiently effective at limiting disease spread or if the size of the susceptible population is sufficiently large. Credible rules that limit a government's ability to lock down the economy in the future can improve the efficiency of lockdown policy.

Keywords: Coronavirus; COVID-19; SIR Model; Optimal Policy; Rules; Commitment; Flexibility (search for similar items in EconPapers)
JEL-codes: E61 H12 I18 (search for similar items in EconPapers)
Date: 2020-04-22
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Related works:
Journal Article: Pandemic Lockdown: The Role of Government Commitment (2022)
Working Paper: Pandemic Lockdown: The Role of Government Commitment (2021)
Working Paper: Pandemic Lockdown: The Role of Government Commitment (2020)
Working Paper: Pandemic Lockdown: The Role of Government Commitment (2020)
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