Deck 6: Economics of Recovery

Question 1

During the pandemic phase, what are the characteristics of economic recovery? What economic data may be used to document a country's economic recovery?

Answer 1

Among the various indicators of economic recovery in a given market, one particularly prevalent manifestation is observable economic growth along a business cycle curve. If the curve shifts up, this indicates economic growth. In a more tangible context, other examples of economic recovery include diminishing unemployment rates, increased consumer spending, greater output by firms, and lesser need for government economic and fiscal intervention (in the form of stimulus funding, for example). Another salient source of information for a given country's economic health is its GDP, which helps to measure and illustrate output, through a combination of consumption, investment, government spending, and net exports. Collecting information on all of these metrics serves well to capture empirical data for how a given economy is performing in terms of recovery, including during and subsequent to a pandemic.

Question 2

What components impact the shape of a country's economic recovery? Which are most important?

Answer 2

The COVID-19 recovery path bifurcates in two directions:
• Large firms and public-sector institutions with direct access to government and central bank stimulus packages
• Small and medium-sized enterprises, blue-collar workers, and the dwindling middle class.
Misallocation of stimulus funds or emergency subsidies makes some areas of the economy recover fast but leaves out others. Businesses with access to government and central bank stimulus are expected to recover faster than small businesses and industries directly affected by COVID-19, such as hospitality. Therefore, when the injected liquidity or subsidies go toward specific industries or market players, it creates greater inequality. Inequality leads to a dip in demand curves and an increase in levels of unemployment and private debt. As unemployment and private debt levels increase, so do defaults. A solution to that problem would be the use of technology. Using technology could help address concerns that are not being addressed by government stimulus packages. It could also ensure that businesses remain operational and shorten the unemployment recovery curve.

Question 3

With respect to economic recovery, does the 1918 influenza pandemic offer an historical precedent for the 2020 coronavirus pandemic? Explain.

Answer 3

With respect to lethality and global reach, the 1918 influenza pandemic establishes historical perspective for the 2020 coronavirus pandemic. For both mortality and economic outcomes, the influenza pandemic provides a reasonable upper bound. Many countries reacted to the influenza pandemic, which began and peaked in 1918 but lasted until 1920, with lockdowns and other non-pharmaceutical interventions, including social distancing, school closings, and targeted quarantines, the same measures taken during the coronavirus pandemic.

Question 4

Review Harvard University's Roadmap to Pandemic Resilience, available online. List and explain the public health and economic components.

Question 5

For an effective economic recovery, is it crucial to first minimize daily infections? Or is it possible to re-open an economy while infections persist?

Question 6

How should a country structure the process of economic mobilization? Should all shuttered businesses open at once? Should a staggered process occur? What are the costs and benefits of each approach?

Question 7

For a country, find time-series data on GDP, including several periods before the coronavirus pandemic, during the pandemic, and after. Graph the data, with GDP on the vertical axis and time on the horizontal axis. What is the shape of recession and economic recovery? Does the pattern fit a V, U, W, L, or reverse-radical shape?

Question 8

Which roadblocks are most important in impacting the process of economic recovery? Why? What components of economic recovery may restrict or eliminate the roadblocks? Besides the roadblocks listed in this chapter, what other roadblocks exist?

Question 9

Are quarantine fatigue and economic haste related? Explain your answer. How do they complicate the process of economic recovery?

Question 10

What pre-existing economic conditions strengthen a country's process of economic recovery?