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Impact of non-pharmaceutical interventions (NPIs) to reduce COVID-19 mortality and healthcare demand published by WHO (3/2020).
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"The global impact of COVID-19 has been profound, and the public health threat it represents is the most serious seen in a respiratory virus since the 1918 H1N1 influenza pandemic. Here we present the results of epidemiological modelling which has informed policymaking in the UK and other countries in recent weeks. In the absence of a COVID-19 vaccine, we assess the potential role of a number of public health measures – so-called non-pharmaceutical interventions (NPIs) – aimed at reducing contact rates in the population and thereby reducing transmission of the virus. In the results presented here, we apply a previously published microsimulation model to two countries: the UK (Great Britain specifically) and the US. We conclude that the effectiveness of any one intervention in isolation is likely to be limited, requiring multiple interventions to be combined to have a substantial impact on transmission.
Two fundamental strategies are possible: (a) mitigation, which focuses on slowing but not necessarily stopping epidemic spread – reducing peak healthcare demand while protecting those most at risk of severe disease from infection, and (b) suppression, which aims to reverse epidemic growth, reducing case numbers to low levels and maintaining that situation indefinitely. Each policy has major challenges. We find that that optimal mitigation policies (combining home isolation of suspect cases, home quarantine of those living in the same household as suspect cases, and social distancing of the elderly and others at most risk of severe disease) might reduce peak healthcare demand by 2/3 and deaths by half. However, the resulting mitigated epidemic would still likely result in hundreds of thousands of deaths and health systems (most notably intensive care units) being overwhelmed many times over. For countries able to achieve it, this leaves suppression as the preferred policy option.
We show that in the UK and US context, suppression will minimally require a combination of social distancing of the entire population, home isolation of cases and household quarantine of their family members. This may need to be supplemented by school and university closures, though it should be recognised that such closures may have negative impacts on health systems due to increased absenteeism. The major challenge of suppression is that this type of intensive intervention package – or something equivalently effective at reducing transmission – will need to be maintained until a vaccine becomes available (potentially 18 months or more) – given that we predict that transmission will quickly rebound if interventions are relaxed. We show that intermittent social distancing – triggered by trends in disease surveillance – may allow interventions to be relaxed temporarily in relative short time windows, but measures will need to be reintroduced if or when case numbers rebound. Last, while experience in China and now South Korea show that suppression is possible in the short term, it remains to be seen whether it is possible long-term, and whether the social and economic costs of the interventions adopted thus far can be reduced."
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The European Union and democracy must deliver by Group of concerned economists published by VOXEU (3/2020).
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The world is living an extreme event that threatens the health and the economic wellbeing of the entire population. Large portions of the populations in some regions are mandated to stay at home. The challenge is to maintain the production of essential goods and services and ensure that they reach hospitals, households, and firms in time. Countering the health crisis is at the core of recovery from the economic crisis. In-depth knowledge of input-output linkages and logistics will be a crucial planning tool. Big datasets must be collected and used to monitor the real-time evolution of the economy and to identify bottlenecks in the economic chain. Income support should be given to those who will lose a significant part of their income. Reducing uncertainty about the future solvency of businesses will be crucial to secure the supply of essential goods and services. A large-scale emergency programme requires massive emergency funding. In the face of extraordinary circumstances, the ECB must be allowed to finance such a programme. The EU must act now to prevent the suffering of its people and to save itself and the democratic values it stands for.
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1. The COVID-19 pandemic is an extreme event that may come to threaten the survival of the EU and the democratic regimes in its member countries. The pandemic combines tremendous threats to both the health and the economic wellbeing of the entire population. The EU must act now to prevent human suffering from reaching levels unseen in Europe since WWII, and to save the democratic values it stands for.
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2. From an economic point of view, the novelty of this crisis is that, due to the risk of contagion, industries whose production requires people to be physically close to each other are subject to severe restrictions. The nature of modern, decentralised economies makes them extremely vulnerable to the shutdown of entire sectors of activity. This means that countering the health crisis is at the core of recovery from the economic crisis.
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3. The disruption caused by the COVID-19 pandemic affects demand and supply simultaneously, with negative feedback effects. However, the essential feature of this disruption is its magnitude: entire populations in some regions or countries are mandated to stay at home. If workers do not show up for work, firms do will not produce; if buyers are unable or unwilling to place orders, production in firms in the supply chain will suffer. As a consequence, defaults on nominal obligations will rise and spread like wildfire along the economic and financial chain. Firms will be unable to pay their suppliers and workers, to repay loans, or to meet tax and social security obligations. If firms do not produce, income is not generated. Households will be unable to pay the rent or the mortgage, credit card balances, children’s school fees, taxes, and so on. All this may soon become true for an unusually large fraction of the economy – and “soon” may mean a few weeks..."
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Preparing public financial management systems to meet Covid-19 challenges by Sandeep Saxena and Michelle Stone published by IMF (3/2020).
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"The outbreak of Covid-19 will test public financial management (PFM) systems in many ways, as did previous health emergencies related to Ebola and SARS. The challenges are likely to come mainly from: (i) estimating and finding additional budgetary and financial resources; (ii) ensuring availability of funds to service delivery units and disbursing them efficiently with due regard to controls; (iii) tracking and accounting for resources deployed in emergency response and reporting it transparently; and (iv) ensuring business continuity when faced with large-scale absence of staff. This note outlines steps that governments can take to prepare and strengthen the capacity of their PFM systems to respond to these challenges.
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- PFM objectives in responding to a pandemic
PFM systems are critical to support the efficacy of the government’s emergency response. Governments around the world are facing the challenges posed by the Covid‑19 outbreak. Unprecedented pressures are likely on healthcare systems—both public and private—and governments may be required to provide fiscal stimulus in response to the crisis. Governments need to ensure that their PFM system is equipped to meet the additional requirements and new challenges in terms of:
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- Delivery of emergency health services, supporting provision of health care to patients, the purchase of supplies, equipment, and human resources to monitor, contain and mitigate the outbreak of Covid-19;
- Ongoing delivery of essential services that may come under stress during an outbreak;
- Supporting new fiscal policies to assist sections of population in financial hardship; and
- Continued operations despite absence of PFM staff across government.
PFM systems should also be capable of supporting fiscal objectives¾whether that is finding offsetting savings for increased Covid‑19 related spending, or the preparation and delivery of fiscal stimulus packages to support economic activity where appropriate..."
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When "whatever it takes" isn't enough by Willem H. Buiter published by Project Syndicate (3/20).
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"When interpreting the US Federal Reserve’s weekend announcement of new measures to mitigate the fallout from the COVID-19 pandemic, it is important not to confuse motion with action.
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Arguably, the Fed’s latest move to ease monetary policy is unprecedented, not least because it was announced on a Sunday afternoon. The Fed cut the federal funds rate by 100 basis points (to the 0-0.25% range), which will likely translate into a meaningful reduction in the marginal cost of corporate and household borrowing from banks. The Fed is also reactivating quantitative easing (QE). In the coming months, it will increase its holdings of Treasury securities by at least $500 billion and its holdings of mortgage-backed securities issued by one of three quasigovernmental agencies (known as Ginnie Mae, Fannie Mae, and Freddie Mac) by at least $200 billion. And it will reinvest all maturing principal payments from these holdings in agency mortgage-backed securities.
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In addition to these measures, the Fed also recently expanded its overnight repurchase-agreement (repo) operations and has announced that it will loosen capital and liquidity requirements for banks. But the most important part of the March 15 announcement was the promise to pursue 'coordinated central bank action to enhance the provision of US dollar liquidity,' in partnership with the Bank of Canada, the Bank of England, the nank of Japan, the European Central Bank, and the Swiss National Bank. To that end, the pricing of existing dollar-swap lines has now been lowered by 25 basis points; and, more significantly, foreign central banks will 'begin offering US dollars weekly in each jurisdiction with an 84day maturity, in addition to the 1-week maturity operations currently offered.'..."
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The COVID-19 crisis by Project Syndicate (2020).
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"With COVID-19 having emerged in Wuhan, China, in December 2019 and quickly spread around the world, PS commentators assess the implications for the economy, propose policy responses, and consider what might – and should – come next.
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Commentaries: Pinelopi Koujianou Goldberg; Willem H. Buiter; Federica Mogherini; Hans-Werner Sinn; Jayati Ghosh; Raghuram G. Rajan...
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Helicopter Money: the time is now by Jordi Galí published by VoxEU (3/2020).
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"The rapid spread of the coronavirus in many countries constitutes a major challenge to their health systems. Under all realistic scenarios, an overwhelming number of human lives will be lost, partly as a result of the inability to provide proper intensive care to all patients that need it. This has led many governments to attempt to slow down the rate of infection through a number of measures, including home confinement, travel restrictions, closing of restaurants and theatres, suspension of sports events, and so on.
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Those measures, while necessary, are bound to have a direct impact on the economy, operating through different channels.
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- First, they will have a direct effect on production and sales in many sectors, where activity will collapse partly or completely during the emergency, either as a result of supply disruption (due to the unavailability of inputs, labour or otherwise) or a fall in demand (due to the forced change in consumption patterns resulting from health-related measures).
A direct loss of GDP is thus unavoidable, given the path of action required to contain the spread of the virus. And if prolonged by more than one or two months, it is bound to result in a cumulative loss of output similar to or larger than that experienced during the last financial crisis.
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That direct loss of GDP, which will be largely reflected in a decline in the consumption of goods and services during the health crisis, will be painful but relatively bearable. Unfortunately, that direct cost may be amplified by the presence of indirect effects if the fall in output leads to a significant reduction in employment (with the consequent loss of income and consumption). Alternatively, firms may try to keep their payroll unchanged and keep meeting other fixed expenses (e.g. rent, interest) during the inactivity period, by taking loans from banks. But banks may be reluctant to extend those loans, given the probability of default and the likely deterioration underway in their balance sheets. In the case banks went ahead and provided that additional funding, the resulting increase in firms' indebtedness would weaken their balance sheets permanently and may cause – sooner or later – a wave of bankruptcies or, in the best case, a highly deteriorated balance sheet..."
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Coronavírus: Exercícios de projeção de casos para o Rio Grande do Sul por Pedro Zuanazzi e Vanessa Sulzbach publicado por DEE/SEPLAG - Gov/RS (3/2020).
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" Análise de Cenários de Curto Prazo para evolução do Covid-19 no RS;
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✓ Avaliação de 3 cenários:
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✓ Extremo: semelhante à evolução de Itália, Irã e Coreia do Sul;
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✓ Agressivo: semelhante à evolução de França, Espanha e Alemanha;
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✓ Moderado: semelhante à evolução de Japão;
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✓ Análise de longo prazo depende de outros métodos e mais informações.
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✓ Informações históricas do panorama internacional;
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✓ Utilizamos dados diários de registros de infecções, recuperações e mortes por países;
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✓ Última atualização: 17/03/2020
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✓ Fonte: Universidade John Hopkins
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✓ Modelo de ajuste geométrico para 14 dias após o 50º caso.
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COVID-19 pandemic poses risk of recession by Alessandro Rebucci published by Johns Hopkins Carey Business School (2020).
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"The devastation wrought by the COVID-19 outbreak is evident not only in the well-known “global cases” map produced by Johns Hopkins University. It’s also displayed nearly daily in the downward-pointing graph lines from stock markets around the world.
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March 11, 2020, proved especially noteworthy, and grim, as the latest declines ended the longest-lasting bull market in the history of American equities. The Dow Jones Industrial Average took a tumble that day of nearly 6 percent. That left it 20 percent below its record high of just a few weeks earlier. The bear was back on the prowl.
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At the close of the day, Carey Business School Associate Professor Alessandro Rebucci viewed the damage from the recent market activity and offered his interpretation of what it means for the near term and what it could mean in the long term. For the most part, his outlook is not rosy. “The U.S. economy,” Rebucci said, “depends on the optimism of its consumers, and this has been shattered by the COVID-19 pandemic..."
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COVID-19: Governments must avoid creating additioal uncertainty by Henrik Müller published by VOXEU (3/2020).
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"It is becoming clear that the coronavirus epidemic is causing major disruptions to economic activity worldwide, and the quest for adequate policy responses is underway. At the outset of the crisis, many affected countries have pursued a step-by-step approach, weighing a wide array of medical as well as economic policy counter measures. As quarantine requirements are imposed and virus-testing and hospital capacities are expanded, economic policy has started to cushion the fall-out from an exogenous shock that is harming both the demand and the supply side. As a first line of defence, all the G7 countries’ central banks have reacted by loosening monetary policy. Fiscal measures – ranging from targeting the effects of the outbreak directly (e.g. expanding sick-leave and short-hours schemes) to outright deficit spending programmes at the euro area level, as proposed by the French government – have been discussed and, partly, put into effect.
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This piecemeal approach is misguided. We are confronted with a complex global crisis that is rooted in falling demand and supply as well as in high levels of uncertainty. It’s not just citizens staying out of supermarkets and firms having to halt production, it’s also profoundly blurred, or even bleak, expectations about the future that are bound to dampen investment and consumption (e.g. Bloom et al. 2007, Bloom 2009) over a longer period of time, with possibly grave consequences for economic growth and wellbeing. In this environment, governments should beware of worsening the situation by adding an extra dose of uncertainty themselves. Still, this is what is bound to happen in the course of the COVID-19 crisis. Recent economic history provides an analogy to the current situation..."
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Coronavirus and macroeconomic policy por Luca Fornaro and Martin Worf published by VOXEU (3/2020).
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"As we write, the COVID-19 coronavirus is spreading throughout the globe. Besides its impact on public health, this coronavirus outbreak is likely to have significant economic consequences. The consensus is that the virus will cause a negative supply shock to the world economy, by forcing factories to shut down and disrupting global supply chains (OECD 2020). But how deep and persistent is this supply disruption going to be? Will aggregate demand be affected? How should monetary policy respond? What about fiscal policy?
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In Fornaro and Wolf (2020), we look at these questions through the lens of a simple model. We focus on the (hopefully pessimistic) possibility that the supply disruption caused by COVID-19 will be severe and persistent.1 We show that the spread of the virus might cause a demand-driven slump, give rise to a supply-demand doom loop, and open the door to stagnation traps induced by pessimistic animal spirits..."
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