How the Government Pulls Coronavirus Relief Money
Out of Thin Air
“Once-fringe ideas in economic theory are now nearly
official policy as government borrowing surges and the Federal Reserve signals
it could buy unlimited debt”.
Related:
Virus Recession Gives Economists a Shot at
Redemption
Noah Smith observes:
“But with the coming of the coronavirus depression,
macroeconomists have a golden opportunity to redeem themselves. Shutdowns have
given theorists some time to think about what’s coming. This downturn is going
to be bigger and more complicated than the last one, which only increases the
need for theories to anticipate some of the potential scenarios.”
Cash and the Zero-Lower Bound Problem
https://vivekjayakumar.blogspot.com/2020/02/cashless-society-and-monetary-policy.html
COVID-Induced Economic Uncertainty by Scott
R. Baker, Nicholas Bloom, Steven J. Davis, & Stephen J. Terry
NBER Working Paper No. 26983
Assessing the economic impact of the COVID-19 pandemic
is essential for policymakers, but challenging because the crisis has unfolded
with extreme speed. We identify three indicators – stock market volatility,
newspaper-based economic uncertainty, and subjective uncertainty in business
expectation surveys – that provide real-time forward-looking uncertainty
measures. We use these indicators to document and quantify the enormous
increase in economic uncertainty in the past several weeks. We also illustrate
how these forward-looking measures can be used to assess the macroeconomic
impact of the COVID-19 crisis. Specifically, we feed COVID-induced first-moment
and uncertainty shocks into an estimated model of disaster effects developed by
Baker, Bloom and Terry (2020). Our illustrative exercise implies a year-on-year
contraction in U.S. real GDP of nearly 11 percent as of 2020 Q4, with a 90
percent confidence interval extending to a nearly 20 percent contraction. The
exercise says that about 60 percent of the forecasted output contraction
reflects a negative effect of COVID-induced uncertainty.