Pandemics and economic turmoil in the short‐run: The role of fiscal space

João Tovar Jalles
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Abstract

Abstract We estimate, by means of the local projection method, the short to medium‐term economic impact of previous pandemics in a sample of 170 countries during the 2000–2018 period. We find that the output effect has been significant (reaching over −2 percent after 5 years) and persistent. The impact has varied across income groups, with pandemics affecting more developed countries through a big negative impact on investment. Moreover, we explored the relevance of fiscal space in affecting the negative economic impact of pandemics. To this end, we constructed new aggregate fiscal space variables based on a principal component analysis that combined several indicators. Results suggest that the initial fiscal landscape of countries was a key ingredient in softening the economic impact of past pandemics. We believe that this paper's findings are useful to inform policymakers about what can be expected in the new normal that is following the recent COVID‐19 pandemic, particularly in a context of increasingly constrained fiscal space.
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流行病与短期经济动荡:财政空间的作用
摘要:我们通过局部预测方法估计了2000-2018年期间170个国家样本中以往大流行的中短期经济影响。我们发现产出效应显著(5年后达到- 2%以上)并且持续存在。不同收入群体的影响各不相同,大流行病通过对投资的重大负面影响影响较发达国家。此外,我们还探讨了财政空间在影响流行病的负面经济影响方面的相关性。为此,我们基于结合多个指标的主成分分析构建了新的总财政空间变量。结果表明,各国最初的财政状况是减轻过去大流行对经济影响的关键因素。我们认为,本文的研究结果有助于政策制定者了解在最近的COVID - 19大流行之后的新常态下可以期待什么,特别是在财政空间日益紧张的背景下。
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