The spread of COVID-19 is not going to follow an exponential curve – and grave errors will follow if analysts believe it will. The number of new cases rises rapidly, peaks, and then declines. It’s called the epidemiological curve. It’s not a theory or hypothesis; it plays out that way every flu season. It is how it has played out in China and Korea for COVID-19. Flattening the peak to avoid overloading the healthcare system is the main medical goal of the seemingly extreme containment policies we have seen to date.
The novel coronavirus represents a fearsome risk which is stirring feverish behaviour by investors worldwide. This columns shows that initially, economic expectations about international trade underlay movements in the stock prices of individual firms; later, concerns about corporate debt began to play a role.
Stefano Ramelli, Alexander Wagner
Previous studies provided evidence that even in developed countries, parents behaved differently with sons than with daughters. In light of more recent data, this column presents new evidence that the preference for sons appears to have declined in the US. Having a female first child continues to increase the likelihood of a family’s living without a father, but is now associated with lower fertility over time.
Francine Blau, Lawrence Kahn, Peter Brummund, Jason Cook, Miriam Larson-Koester
The unfolding coronavirus epidemic represents a severe economic stress test for Europe as well as a test of European unity. This column discusses how the crisis might unfold and the appropriate policy response. It advocates a comprehensive emergency package through which the EU would take responsibility for a meaningful share of the overall emergency effort.
Agnès Bénassy-Quéré, Ramon Marimon, Jean Pisani-Ferry, Lucrezia Reichlin, Dirk Schoenmaker, Beatrice Weder di Mauro
The UK has seen slow rates of productivity growth over the past decade, with output per hour and real wages no higher today than they were prior to the global financial crisis. This column reveals how nearly half of leading economists surveyed by the Centre for Macroeconomics point to low demand due to the financial crisis, austerity policies and Brexit as a major cause for this productivity slowdown. Despite this diagnosis, only a small minority of the panel believes that the solution lies in demand-side policy. Instead, a majority support promoting productivity growth through investments in education and worker training. Other policies, such as infrastructure investments, and tax and regulatory policies are also proposed.
Since the Global Crisis, there has been a renewed awareness of how frictions in credit markets can damage economic efficiency due to a higher cost of capital and/or capital being misallocated away from its most productive uses. This column presents a new methodological approach for calculating the cost of credit frictions which can be implemented with relatively simple data in multiple contexts. It finds that credit market frictions explain half of the fall in UK productivity in the Great Recession and depress output by 28% on average.
Tim Besley, Isabelle Roland, John Van Reenen
A robust finding in the social sciences is the strong positive correlation between education and health status at all age, but evidence on causality in this relationship has been mixed. This column exploits two education reforms in the UK to study the causal link between education and a large set of prevalent chronic health conditions. While the results indicate, as expected, a clear and statistically significant negative association between years of education and chronic ill health, the strength of association weakens considerably – with the exception of diabetes – once causal identification techniques are applied.
Katharina Janke, David Johnston, Carol Propper, Michael A Shields
The information channel of monetary policy theory – whereby economic agents revise their beliefs after an unexpected monetary policy announcement not only because they learn about the current and future path of monetary policy, but also because they learn new information about the economic outlook – can potentially explain the puzzle of output increasing after a contractionary monetary policy shock. This column argues, however, that the information channel has disappeared in the US, perhaps due to the improved communication strategies implemented by the Federal Reserve.
Lukas Hoesch, Barbara Rossi, Tatevik Sekhposyan
The novel coronavirus is both something old and something new. As usual, the pandemic is both an aggregate demand and an aggregate supply shock, but the fact that it has hit China first and hardest, and the supply chain implications of this, make it something new. This column introduces a new Vox eBook containing 14 essays written by leading economists on a wide array of topics related to COVID-19 economics.
Richard Baldwin, Beatrice Weder di Mauro
Artificial intelligence, such as the Bank of England Bot, is set to take over an increasing number of central bank functions. This column argues that the increased use of AI in central banking will bring significant cost and efficiency benefits, but also raise important concerns that are so far unresolved.
Jon Danielsson, Robert Macrae, Andreas Uthemann