Clark Center Forum

The European economy is experiencing a severe economic contraction as a result of the coronavirus lockdowns in place across most countries. We invited our European panel to express their views on Europe’s economic policy response to the Covid-19 crisis: first, on whether the economic benefits from lockdowns are likely to outweigh their costs over the medium term; and second, on the desirability of a pan-Eurozone fiscal policy response to supplement national measures, including the possibility of issuing new pooled debt instruments – known as ‘coronabonds’ – to fund government spending. 

Arnoud Boot, Elena Carletti, Hans-Helmut Kotz, Jan Pieter Krahnen, Loriana Pelizzon, and Marti Subrahmanyam This policy letter adds to the current discussion on how to design a program of government assistance for firms hurt by the Coronavirus crisis. While not pretending to provide a cure-all proposal, the advocated scheme could help to bring funding to […] 

Severe lockdowns – including closing non-essential businesses and strict limitations on people’s movement – are likely to be better for the economy in the medium term than less aggressive measures. While national governments have responded to the crisis with substantial economic policy measures, a joint euro area fiscal response is still highly desirable. Given the […] 

This week’s IGM European Economic Experts Panel statements:

A) Severe lockdowns – including closing non-essential businesses and strict limitations on people’s movement – are likely to be better for the economy in the medium term than less aggressive measures.

B) While national governments have responded to the crisis with substantial economic policy measures, a joint euro area fiscal response is still highly desirable.

C) Given the willingness of the European Central Bank to buy sovereign bonds, including Italian bonds, without limits, there is no need for ‘coronabonds’. 

Gary Becker Eleven years ago, in March 2009, Nobel laureate Gary Becker wrote a blog post about the economic costs of a pandemic equal in severity to the Great Pandemic of 1918-19. He calculated that if the same percentage of the population were to die from such a pandemic in all countries, the total cost […] 

Matthias Doepke and Fabrizio Zilibotti The disruption of schooling during the pandemic will have disparate effects across the socio-economic ladder. The achievement gap between children from poorer and richer families is bound to rise as long as school closures continue. Fortunately, there is still time to take action and push back against the repercussions of […] 

Paul De Grauwe Having witnessed the 2008 financial crisis and the subsequent eurozone debt crisis, Europe’s policymakers should already realize what the COVID-19 pandemic could mean for the economy. To avert a self-perpetuating downward spiral, the European Central Bank, in particular, will need to start thinking outside the box. Read more> 

Lucrezia Reichlin and Dirk Schoenmaker Fiscal and monetary policy coordination is not working in the euro area. This column argues that in order to rebalance the weight of both during major crises, the asymmetry between decision making at the ECB (by majority voting) and the ESM (by unanimity or qualified majority) must be harmonised. This […] 

SUBSCRIPTION REQUIRED Beata Javorcik Even if we are able to fight the coronavirus pandemic into submission, its effects are likely to spark nothing less than a rethink of how the world does business.Businesses will be forced to rethink their global value chains, shaped to maximise efficiency and profits. Read more> 

Eric Budish This note suggests that we view R < 1 as an economic constraint, allowing social welfare in the traditional sense (economic activity, societal well-being) to be the policy objective. This formulation highlights two key questions at the intersection of health and economics research in response to the Covid-19 crisis. First, what activities maximize […]