A Note on Hibernation in a Lockdown

Federico Sturzenegger

No 137, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: Discussion on the optimal fiscal response to lockdowns is just starting. In this note, we make a simple yet apparently ignored point. If a lockdown entails a reduction in the desire for consumption the optimal response is to reduce consumption, a response that I call "hibernation". In this case, attempts to smooth the effect of the lockdown, which has been the almost universal recommendation to deal with Covid-19, leads to welfare losses.

Keywords: fiscal policy; consumption (search for similar items in EconPapers)
JEL-codes: E20 H30 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2020-04, Revised 2020-04
New Economics Papers: this item is included in nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://webacademicos.udesa.edu.ar/pub/econ/doc137.pdf First version, April 2020 (application/pdf)

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