Facing an unfortunate trade-off: policy responses, lessons and spill-overs during the COVID-19 pandemic

Catalin Dragomirescu-Gaina

Economics & Human Biology, 2021, vol. 43, issue C

Abstract: Although COVID-19 emerged as a global shock, governments adopted non-pharmaceutical policy responses that were rather heterogeneous, depending on cultural and institutional characteristics. At the country level, the stringency of ‘lockdown’-type policies should be set to achieve the best possible trade-off between economic and fatality dynamics, obviously accounting for possible cross-border influences. To allow for policy learning, I assume that the first country implementing a policy initiative that is worth emulating must either get the best possible health or the best possible economic outcome. I propose a combination of sign and magnitude restrictions, embedded in a global VAR model, to identify idiosyncratic policy shocks that spill over and influence policy responses abroad. Once policy shocks are identified, I run a comparison exercise between two model specifications, i.e. with and without policy emulation. Within a given a sample, this methodology can be used to find when and where policy lessons can be identified. I find that, among 17 developed and developing countries, few can offer lessons based on their policy initiatives, but several others might get better trade-offs through policy emulation, although in reality this outcome is not guaranteed to have occurred.

Keywords: COVID-19; policy stringency; sign and magnitude restrictions; GVAR (search for similar items in EconPapers)
JEL-codes: E61 F6 I18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ehbiol:v:43:y:2021:i:c:s1570677x21000769

DOI: 10.1016/j.ehb.2021.101052

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