COVID-19, lockdown and two-sided uncertainty

Benjamin Davies and Arthur Grimes

New Zealand Economic Papers, 2022, vol. 56, issue 1, 49-54

Abstract: When COVID-19 struck, the New Zealand government had two choices: enter lockdown immediately or delay its decision. Delay would have enabled more information to emerge about health and economic dynamics, while preserving the option to act at a later date. However, delay may have destroyed the option to eradicate COVID-19. We model the government’s decision when faced with the uncertainty around health and economic dynamics generated by COVID-19. Our model captures both two-sided uncertainty and the dynamic consequences that flow from the government’s initial decision. Our analysis will help guide future policy decisions amid similarly complex uncertainties.

Date: 2022
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DOI: 10.1080/00779954.2020.1806340

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