Istituto di Economia Internazionale - When the Contagion Effect Went Live: The First Responses to the COVID-19 Pandemic

Recent Articles

Read more about our latest published articles.

Review’s Archive

Corresponding Author:
Giuseppe Mastromatteo, Department of Economic Policy, Università Cattolica del Sacro Cuore, Milan, Italy

Coauthors:
Lorenzo Esposito, Bank of Italy, Milan Branch and Economic Policy Department, Università Cattolica del Sacro Cuore, Milan, Italy

When the Contagion Effect Went Live: The First Responses to the COVID-19 Pandemic

Volume 73 - Issue 4, November 2020
(pp. 467-496)
JEL classification: E5, F50, H1, I10
Keywords: Pandemic, Crisis, Financial Stability, Economic Policy

Abstract

The CoViD-19 pandemic has changed world history and sparked a huge debate among social scientists. In this work, we concentrate on the initial (two months of) institutional responses to the pandemic in the advanced economies, by analyzing the discussions in the press and in the scientific literature. These first analyses of the pandemic represent the “instinctive” and “automatic” responses of the economic profession, on one side, and policymakers on the other, to the emergency, which allows for an interesting overview of the progression of events.

We will deal with the international and domestic measures aimed at countervailing the collapse of income and production, the new role of governments and central banks in the economy, and how the adopted anti-shock measures have already forced some countries to shift their institutional economic policy framework. This is especially relevant for the European Union, since the Stability and Growth Pact can be seen as one of the first ‘victims’ of the virus, as well as possibly its financial system, which has also succumbed to a contagion effect. Finally, we will discuss if and how economic theory will be able to come forth with new ideas and provide novel and viable solutions.

Read the full article

Download the article in PDF format to read and print.

Bibliography

Ahuja, A. (2020), “Gathering Data Would Liberate us from a Much Longer Lockdown”, Financial Times, 22 April.

Alpert, B. (2020), “White House Resists Governors’ Calls to Nationalize Medical Supplies”, Barrons, 22 March.

Amato, M. (2020), “L’eurozona fra il pericolo della dissoluzione e l’occasione di un ripensamento”, Economia e Politica, 11 April.

Armstrong, R. (2020), “Coronavirus is not a Crisis of Globalization”, Financial Times, 12 March.

Arnold, M. (2020), “ECB Loosens Collateral Rules to Accept Fallen Angel’ Bonds”, Financial Times, 23 April.

Baldwin, R. and B. Weder Di Mauro (Eds) (2020), Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes, CEPR Press: London.

Banerjee, R., A. Illes, E. Kharroubi and J.M.S. Garralda (2020), “Covid-19 and Corporate Sector Liquidity”, BIS Bullettin No. 10.

Bayoumi, T., G. Dell'Ariccia, K.F. Habermeier, T. Mancini Griffoli and F. Valencia (2014), “Monetary Policy in the New Normal”, IMF Staff Discussion Notes No. 14/03.

Beck, T. (2020), “Finance in the Times of COVID-19: What Next?”, in: R. Baldwin, B. Weder Di Mauro (Eds), “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes”, CEPR Press: London.

Biancotti, C., A. Rosolia, F. Venditti e G. Veronese (2020), Salviamo i dati economici dal Covid 19, Banca d’Italia: Roma.

Blanchard, O. and J. Pisani-Ferry (2020), “Monetisation: Do not Panic”, VoxEU, 10 April.

Boitani, A. and R. Tamborini (2020), “Coronabond, titoli di cittadinanza europei”, LaVoce, 31 March.

Bonetti, A. (2020), “Eurobond o finanziamento monetario? – Intervista a Massimo Amato e Gennaro Zezza”, KriticaEconomica, 22 April.

Bossone, B. (2020), “Monetizzazione del debito durante il Covid19: c’è molto da chiarire”, Economia e Politica, 29 April.

Breitenfellner, A. and P. Ramskogler (2020), “How Deep will it Fall? Comparing the Euro Area Recessions of 2020 and 2009”, SUERF Policy Note No. 150.

Brooke, M. (2020), “Workers Rights and Protections are Suddenly Top of the Agenda”, Financial Times, 11 March.

Brundesn, J. (2020), “EU Warned over Reliance on India and China Drug Imports”, Financial Times, 21 April.

Brundsen, J. (2020), “Brussels Relaxes Bank Rules to Fund 450bn Lending Boost”, Financial Times, 29 April.

Cheng, J., D. Skidmore and D. Wessel (2020), “What’s the Fed Doing in Response to the COVID-19 Crisis? What More Could it Do?”, The Brookings Institution, Board of Governors of the Federal Reserve System.

Cipolletta, I. (2020), “Convertire i debiti in capitale di rischio”, Il Sole 24 Ore, 21 April.

Codogno, L. and P. van den Noord. (2019), “The Rationale for a Safe Asset and Fiscal Capacity for the Eurozone”, LSE Discussion Paper No. 144/2019.

Cohan, W.D. (2020), “Grim As it is Now, Larry Summers Guesses Recovery could be Faster than Anticipated”, Vanity Fair, 2 April.

Coveri, A., C. Cozza and L. Nascia (2020), Le catene globali del contagio, in: A. Mastrandrea, D. Zola (Eds), “L’epidemia che ferma il mondo. Economia e società al tempo del coronavirus”, <https://sbilanciamoci.info/wp-content/uploads/2020/04/20_L_epidemia_che_ferma_il_mondo.pdf>.

D’Alessandro, J. (2020), “Shoshana Zuboff: ‘Le app per il controllo della pandemia possono essere obbligatorie come i vaccini’”, La Repubblica, 9 April.

Dabla-Norris, E., S Guo, V. Haksar, M. Kim, K. Kochhar, K. Wiseman and A. Zdzienicka (2015), “The New Normal: A Sector-Level Perspective on Productivity Trends in Advanced Economies”, IMF Staff Discussion Notes No. 15/3.

Davies, G. (2020), “Deflation Threat from the Virus will be Long Lasting”, Financial Times, 27 April.

De Grauwe, P. (2020), “The ECB must Finance COVID-19 Deficits”, Project Syndicate, 18 March.

Deaton, A. (2020), “We may not All Be Equal in the Eyes of Coronavirus”, Financial Times, 5 April.

Dell’Ariccia, G., P. Mauro, A. Spilimbergo and J. Zettelmeyer (2020), “Economic Policies for the COVID-19 War”, Blog IMF, 1 April.

Dentico, N. (2020), Cronaca di una pandemia annunciata, in: A. Mastrandrea and D. Zola (Eds), L’epidemia che ferma il mondo Economia e società al tempo del coronavirus, <https://sbilanciamoci.info/wp-content/uploads/2020/04/20_L_epidemia_che_ferma_il_mondo.pdf>.

Dombey, D. (2020), “Spain Calls for 1.5tn EU Recovery Fund to Protect Internal Market”, Financial Times, 21 April.

Dominelli, C. (2020), “Stato a tempo nel capitale delle imprese in crisi”, Il Sole 24 Ore, 23 April.

Donati, A. (2020), La pessima aria che alimenta il coronavirus, in: A. Mastrandrea and D. Zola (Eds), L’epidemia che ferma il mondo Economia e società al tempo del coronavirus, <https://sbilanciamoci.info/wp-content/uploads/2020/04/20_L_epidemia_che_ferma_il_mondo.pdf>.

Draghi, M. (2020), “We Face a War against Coronavirus and must Mobilise Accordingly”, Financial Times, 26 March.

EC (2020), State Aid: Commission Adopts Temporary Framework to Enable Member States to further Support the Economy in the COVID-19 Outbreak, European Commission Press Release, 19 March: Brussels.

EC (2020), Coronavirus: Commission Presents Practical Guidance to Ensure Continuous Flow of Goods across EU via Green Lanes, European Commission Press Release, 23 March: Brussels.

ECB (2020), ECB Takes Steps to Mitigate Impact of Possible Rating Downgrades on Collateral Availability, Euroean Central Bank Press Release, 22 April: Frankfurt.

Elliott, L. (2020), “The Coronavirus Crisis May Lead to a New Way of Economic Thinking”, Guardian, 23 March.

Esposito, L. and G. Mastromatteo (2019), “Defaultnomics. Making Sense of the Barro-Ricardo Equivalence in a Financialized World”, Levy Economics Institute Working Paper No. 933.

Eurointelligence (2020), “EU to Help Hardest-Hit Tourism Sector”, 22 April.

FAO (2020), “COVID-19 – FAO: Prezzi alimentari mondiali in calo a marzo”, Unric.org, 2 April.

Ferrara, L., A. Froidevaux and T-L. Huynh (2020), “Macroeconomic Nowcasting in Times of Covid-19 Crisis: On the Usefulness of Alternative Data”, EconBrowser, 26 March.

Florida, R. and S. Pedigo (2020), “How our Cities can Reopen after the COVID-19 Pandemic”, Brookings.com, 24 March.

Financial Times (2020), “Closing Markets is not the Way to Stop the Slide”, Financial Times, 17 March.

Financial Times (2020), “Virus Puts Responsible Capitalism to the Rest”, Financial Times, 30 March.

Financial Times (2020), “Virus Lays Bare the Frailty of the Social Contract”, Financial Times, 3 April.

Financial Times (2020), “Printing Money is Valid Response to Coronavirus Crisis”, Financial Times, 6 April.

Financial Times (2020), “Deflation is A Bigger Fear than Hyperinflation”, Financial Times, 28 April.

Giavazzi, F. and G. Tabellini (2020), “Eurobond perpetui contro il Covid-19”, La Voce Info, 27 March.

Giraud, G. (2020), “Per ripartire dopo l’emergenza Covid-19”, La Civiltà Cattolica, 4 April.

Goodhart, C. (2012), “Monetary Policy and Public Debt”, FSR Banque de France: Paris.

Gopinath, G. (2020), Limiting the Economic Fallout of the Coronavirus with large Targeted Policies, in: R. Baldwin, B. Weder Di Mauro (Eds), “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever it Takes”, CEPR Press: London.

Guerrieri, V., G. Lorenzoni, L. Straub and I. Werning (2020), “Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?”, NBER Working Paper No. 26918.

Hallum, M. (2020), “Cuomo Says ‘So What’ to ‘Nationalization’ Argument against Defense Production Act”, AmNY, 20 March.

Henninger, D. (2020), “Bring Back Laissez-Faire Capitalism”, Wall Street Journal, 17 April.

IEA (2020), Global Energy Review. The Impacts of the Covid-19 Crisis on Global Energy Demand and CO2 Emissions, International Energy Agency: Paris.

IIF (2020), An Aerial View of the Bank Prudential Regulatory Response to COVID-19, Institute of International Finance: Washington.

IMF (2020), World Economic Outlook, April, Interntional Monetary Fund: Washington.

Ip, G. (2020), “Globalization is Down, but it’s not Out Yet”, Wall Street Journal, 29 April.

Jaumotte, F. and C. Osorio Bruiton (2015), “Inequality and Labor Market Institutions”, IMF Staff Discussion Notes No. 1514.

Javorcik, B. (2020), “The Pandemic will Change the Way the World does Business”, Financial Times, 3 April.

Johnson, M., S. Fleming and G. Chazan (2020), “Coronavirus: Is Europe Losing Italy?”, Financial Times, 6 April.

Kluth, A. (2020), “This Pandemic will Lead to Social Revolutions”, Bloomberg, 11 April.

Kluth, A. (2020), “Coronavirus Has Exposed the EU’s Creeping Irrelevance”, Bloomberg, 25 April.

Korinek, A. and J. Kreamer (2014), “The Redistributive Effects of Financial Deregulation”, IMF Working Paper No. 13/247.

Lucarelli, S. (2020), “Gli eurobond fra logica economica, sofismi e difficili mediazioni”, Economia e Politica, 6 April.

Magsamen, K., K. Mulligan and F. Kendall (2020), “To Respond to the Coronavirus, Trump Should Take 6 Immediate Steps on the Defense Production Act”, Center for American Progress, 19 March.

Masciandaro, D. (2020), “Covid-19 Helicopter Money: Economics and Politics”, CEPR Press, 20 April.

Mason, P. (2020), “Will Coronavirus Signal the End of Capitalism?”, Al Jazeera, 3 April.

Mastrandrea, A. and D. Zola (Eds) (2020), “L’epidemia che ferma il mondo Economia e società al tempo del coronavirus”, <https://sbilanciamoci.info/wp-content/uploads/2020/04/20_L_epidemia_che_ferma_il_mondo.pdf>.

Mazzonis, M. (2020), La tempesta perfetta. Gli Stati Uniti di fronte al Covid-19, in: A. Mastrandrea and D. Zola (Eds), “L’epidemia che ferma il mondo Economia e società al tempo del coronavirus”, <https://sbilanciamoci.info/wp-content/uploads/2020/04/20_L_epidemia_che_ferma_il_mondo.pdf>.

Mazzucato, M. (2020), “Capitalism’s Triple Crisis”, Project Syndicate, 30 March.

Mazzucato M., H. Lishi Li and A. Darzi (2020), “Is it Time to Nationalise the Pharmaceutical Industry?”, BMJ No. 368, <https://doi.org/10.1136/bmj.m769>.

Mazzucchelli, M. (2020), “Capitali, non debito per la ricostruzione”, La Repubblica, 27 April.

Miller, J. M. Arnold and M. Johnson (2020), “European Companies Face Coronavirus Hit to Supply Chains”, Financial Times, 26 February.

Moritz, K. (2020), “Eurozone at Risk of Debt Crisis Worse than Previous One”, Financial Times, 10 April.

Münchau, W. (2020), “Italy is in more Danger than the Eurozone Knows”, Financial Times, 20 April.

Münchau, W. (2020), “How to Think about the EU’s Rescue Fund”, Financial Times, 27 April.

Negri, A. (2020), “‘Annullare i debiti posseduti dalla BCE’ La proposta shock arriva dalla Francia”, Quotidiano del Sud, 15 April.

Neil, I. (2020), “It’s the End of the World Economy as we Know it”, New York Times, 17 April.

Neil, I. (2020), “What the Negative Price of Oil is Telling Us”, New York Times, 22 April.

Nienaber, M. (2020), “German Minister Rejects Euro Bonds – “It’s a Phantom Debate” ”, Reuters, 23 March.

Panizza, U. (2020), Europe’s Ground Zero, in: R. Baldwin, B. Weder Di Mauro (Eds), “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes”, CEPR Press: London.

Pashev, K. (Ed.), P. Casini, N. Kay and S. Pantea (2015), EU Structural Change, European Commission: Brussels.

Plender, J. (2020), “The Seeds of the Next Crisis”, Financial Times, 5 March.

Posen, A.S. (2020), Containing the Economic Nationalist Virus through Global Coordination, in: R. Baldwin and B. Weder Di Mauro (Eds), “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes”, CEPR Press: London.

Rachman, G. (2020), “Strongman Leaders Exploit Coronavirus”, Financial Times, 21 April.

Ramelli, S. and A. Wagner (2020), What the Stock Market Tells us about the Consequences of COVID-19, in: R. Baldwin, B. Weder Di Mauro (Eds), “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes”, CEPR Press: London.

Rana, F. (2020), “A Dangerous Dependence on Wall Street”, Financial Times, 9 March.

Realfonzo, R. (2020), “Finanziamento delle politiche e scenari del debito dopo il Covid-19”, Economia e Politica, 15 April.

Rho, R. (2020), “Il ritorno dello Stato padrone”, La Repubblica, 27 April.

Robin, P. (2020), “The World’s Tech Giants could Come Out of this Rather Well”, Daily Telefigure, 26 March.

Sandbu, M. (2020), “The Merits of Spain’s Proposed Recovery Fund are Irrefutable”, Financial Times, 22 April.

Sanders, B. (2020), “The Foundations of American Society are Failing us”, New York Times, 20 April.

Sapir, A. and J. Manson (2020), “Cut Salaries, Taxes to Reopen U.S. Economy Says Laffer, Conservative Fave”, Reuters, 8 April.

Sen, A. (2020), “A Better Society can Emerge from the Pandemic”, Financial Times, 16 April.

Spencer, J. (2020), “Less Than Zero: What Oil’s Crazy Day Means”, Wall Street Journal, 21 April.

Spini, F. (2020), “Intervista a Daniel Gros: “Stop ai trasferimenti all’Ue per 7 anni. Così Roma risparmierà più di 100 miliardi”, La Stampa, 8 April.

Stelzenmüller, C. (2020), “Coronavirus is also a Threat to Democratic Constitutions”, Financial Times, 16 April.

Stirati, M. (2020), “L’Italia, L’Europa e la crisi da coronavirus”, Economia e Politica, 1 April.

Strauss, D. (2020), “Nations Struggle to Measure Inflation as Virus Disrupts Shopping”, Financial Times, 27 April.

Terazono, E., H. Saleh and J. Reed (2020), “Countries Follow Consumers in Stockpiling Food”, Financial Times, 5 April.

Tett, G. (2020), “Markets Contemplate a Future which Stimulus does not Work”, Financial Times, 13 March.

The Economist (2020), “After the Disease, the Debt”, The Economist, 24 April.

The Economist (2020), “The Price isn’t Right. The Impossibility of Measuring Inflation in a Pandemic”, The Economist, 24 April.

Times (2020), “Action to Protect the Economy Puts the Bank’s Independence in Danger”, Times, 28 April.

Times (2020), “The Economic News is Terrible but you would never Know it from the Markets”, Times, 30 April.

Timiraos, N. and J. Hilsenrath (2020), “FED Breaks its Taboos to Prop up Economy”, Wall Street Journal, 28 April.

Tooze, A. (2020), “How Coronavirus almost Brought Down the Global Financial System”, The Guardian, 14 March.

Trento, S. (2020), “Che lo stato entri nel capitale delle imprese, ma no a un nuovo Iri”, Il Foglio, May 8.

UNCTAD (2018), Trade and Development Report, United Nations: New York.

Valsania, M. (2020), “Coronavirus, scienziati Usa: vaccini rallentati dai profitti delle Big Pharma e austerità pubblica”, Il Sole 24 Ore, 15 March.

Villarosa, A. (2020), “In Italia è arrivato il momento di dare vita a una grande banca pubblica nazionale”, Milano Finanza, 24 April.

VVAA (2020), “La Ue e l’emergenza sanitaria globale. Appello degli economisti europei”, Il Sole 24 Ore, 11 March.

Wakabayashi, D., J. Nicas, S. Lohr and M. Isaac (2020), “Big Tech Could Emerge from Coronavirus Crisis Stronger than Ever”, New York Times, 23 March.

Wall Street Journal (2020), “Trump’s Immigration Distraction”, Wall Street Journal, 22 April.

Wall Street Journal (2020), “Bail Out the States?”, Wall Street Journal, 23 April.

Ward, K. (2020), “Crisis will Awaken Inflationary Forces within a Year”, Financial Times, 17 April.

Wigglesworth, R. (2020), “Coronavirus Creates Biggest Economic Uncertainty in Decades”, Financial Times, 20 April.

Wilkinson, F. (2020), “Gavin Newsom Declares California a ‘Nation-State’”, Bloomberg, 9 April.

Wolf, M. (2020), “The World Economy is now Collapsing”, Financial Times, 14 April.

Wolf, M. (2020), “Why the ECB can Save the Eurozone”, Financial Times, 22 April.

Wolf, M. (2020), “The Crisis Lays Bare the Risks of Leverage”, Financial Times, 29 April.

Yeung, J. (2020), “The Coronavirus Pandemic could Threaten Global Food Supply, UN Warns”, CNN.com, 13 April.

Yi, H., L. Chen, W. Pengfei and X. Zhiwei (2020), Saving China from the Coronavirus and Economic Meltdown: Experiences and Lessons, in: R. Baldwin, B. Weder Di Mauro (Eds), “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes”, CEPR Press: London.

Recent Articles

Review’s Archive

When the Contagion Effect Went Live: The First Responses to the COVID-19 Pandemic

Abstract

Read the full article

Bibliography

Register your account

Authors’ login

Institute for International Economics of the Genoa Chamber of Commerce

Institute for International Economics
of the Genoa Chamber of Commerce