The economic effects of Covid-19 containment measures

Many countries around the world have implemented stringent containment measures to halt the spread of the 2019 coronavirus disease (Covid-19) and limit the number of fatalities. Though crucial to slow the course of the pandemic, these measures entail large short-term economic costs. This paper tries to quantify these effects using daily data on real-time containment measures implemented by countries around the world as well as daily indicators of economic activity such as Nitrogen Dioxide (NO_2) emissions, international and domestic flights, energy consumption, maritime trade, and retail mobility indices. Results suggest that containment measures have had, on average, a very large impact on economic activity—equivalent to a loss of about 15 percent in industrial production over a 30-day period following the implementation of containment measures. Using a novel database on discretionary fiscal and monetary policy measures implemented by countries in response to the crisis, we find that these policy measures have been effective in mitigating some of these costs. Finally, we find that among different types of containment measures, while stay-at-home requirements and workplace closures are the most effective in curbing both infections and deaths, they are also those associated with the largest economic costs.