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Markus Brunnermeier, Jean-Pierre Landau, Marco Pagano, and Ricardo Reis European firms face a temporary, yet dramatic liquidity shortage due to the drop in their revenues, and this may prevent them from being able to keep on paying wages and repaying their current debt obligations, with devastating effects across Europe. The EU can throw them a […] 

Niels Joachim Gormsen and Ralph S. J. Koijen Data on dividend futures, which are claims to the stock market’s dividends in a given year, can be used to estimate the economic impact of the virus at different horizons. As of March 16, expected growth over the next quarter declined by 2.5% in the US and […] 

Emmanuel Saez ad Gabriel Saez The most important message that needs to come from heads of state immediately, even before any new law or complete implementation details are provided, is: “Do not lay off your workers or liquidate your business. Government will pay your idle workers and your necessary maintenance costs while you are shutdown. […] 

Pierre-Olivier Gourinchas A real danger is that the virus mutates and infects our economic system, even as we manage to root it out of our bodies. The objective of economic policy cannot be to eliminate the recession altogether. The priority is to short-circuit all the negative feedback loops and channels of contagion that otherwise amplify […] 

The World Health Organization has declared a global pandemic as the coronavirus spreads rapidly across the world. As tumbling stock markets reveal growing fears about the potential economic impact, we invited both our US and European panels to express their views on the likelihood of a major recession. We also asked them about the relative importance of the supply and demand channels through which COVID-19 is affecting and will affect the economy. 

This week’s IGM Economic Experts Panel statements:

A) Even if the mortality of COVID-19 proves to be limited (similar to the number of flu deaths in a regular season), it is likely to cause a major recession.

B) The economic effects of COVID-19 coming from reduced spending will be larger than those coming from disruptions to supply chains and illness-related workforce reductions. 

This week’s IGM European Economic Experts Panel statements:

A) Even if the mortality of COVID-19 proves to be limited (similar to the number of flu deaths in a regular season), it is likely to cause a major recession.

B) The economic effects of COVID-19 coming from reduced spending will be larger than those coming from disruptions to supply chains and illness-related workforce reductions.

C) The economic policy institutions of the Eurozone are well equipped to ameliorate the potential economic damage from COVID-19. 

This week’s IGM European Economic Experts Panel statements:

A) Germany's current account surplus is undesirable even from a purely German viewpoint: the country would be better off if, for example, it ran a smaller primary surplus, in turn leading to a smaller current account surplus.

B) The Eurozone would be in better shape if fiscal policy were more expansionary, which would allow monetary policy to be slightly less so.

C) If there is a recession in the Eurozone, it will be essential to have a coordinated fiscal expansion. 

This week’s IGM European Economic Experts Panel statements:

A) The European Union goal of reaching net zero emissions of greenhouse gases by 2050 will be a major drag on economic growth.

B) Carbon taxes are a better way to implement climate policy than cap-and-trade.

C) A carbon border tax targeting imports from non-EU countries with less strict climate policies is likely to harm developing economies.