The Impact of Health and Economic Policies on the Spread of COVID-19 and Economic Activity

Matthew Famiglietti and Fernando Leibovici

No 2021-005, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper empirically investigates the causal linkages between COVID-19 spread, government health containment and economic support policies, and economic activity in the U.S. up to the introduction of vaccines in early 2021. We model their joint dynamics as generated by a structural vector autoregression and estimate it using U.S. state-level data. We identify structural shocks to the variables by making assumptions on their short-run relation consistent with salient epidemiological and economic features of COVID-19. We isolate the direct impact of COVID-19 spread and policy responses on economic activity by controlling for demand fluctuations using disaggregate exports data. We find that health containment and economic support policies are highly effective at curbing the spread of COVID-19 without leading to a long-term contraction of economic activity.

Keywords: COVID-19; Health Containment Policies; Non-Pharmaceutical Interventions; Pandemics; Economic Activity (search for similar items in EconPapers)
JEL-codes: E0 F1 I18 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2021-04, Revised 2022-01
New Economics Papers: this item is included in nep-hea and nep-mac
Note: Publisher DOI: 10.1016/j.euroecorev.2022.104087
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Citations: View citations in EconPapers (10)

Published in European Economic Review

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Journal Article: The impact of health and economic policies on the spread of COVID-19 and economic activity (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:90912

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DOI: 10.20955/wp.2021.005

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