Adaptive learning in containment measures: evaluation of policy interventions during the 2020 waves of Covid-19 in Italy

The COVID-19 pandemic hit Italy very harshly in two waves, the first in spring 2020 and the second between the autumn and the winter of the same year. Data show some major differences between the two phases;in particular, the first wave caused fewer infections but had a higher fatality rate. These pandemic evolutions, together with modified social conditions, called for a rapid adaptation of containment measures, i.e. stricter and homogeneous in the first wave, flexible and diversified in the second wave. The interrupted time series analysis applied to daily data on new cases yields positive results for both interventions in flattening the infection curve. The policies achieved almost the same percentage of positive cases avoided in the two waves. Adaptive and diversified policies based on learning from previous results seem to be suitable for this kind of decision-making in conditions of uncertainty. © 2023 Informa UK Limited, trading as Taylor & Francis Group.

The impact of containment measures and monetary and fiscal responses on US financial markets during the COVID-19 pandemic.

This paper analyses the effects of containment measures and monetary and fiscal responses on US financial markets during the Covid-19 pandemic. More specifically, it applies fractional integration methods to analyse their impact on the daily S&P500, the US Treasury Bond Index (USTB), the S&P Green Bond Index (GREEN) and the Dow Jones (DJ) Islamic World Market Index (ISLAM) over the period 1/01/2020-10/03/2021. The results suggest that all four indices are highly persistent and exhibit orders of integration close to 1. A small degree of mean reversion is observed only for the S&P500 under the assumption of white noise errors and USTB with autocorrelated errors; therefore, market efficiency appears to hold in most cases. The mortality rate, surprisingly, seems to have affected stock and bond prices positively with autocorrelated errors. As for the policy responses, both the containment and fiscal measures had a rather limited impact, whilst there were significant announcement effects which lifted markets, especially in the case of monetary announcements. There is also evidence of a significant, positive response to changes in the effective Federal funds rate, which suggests that the financial industry, mainly benefiting from interest rises, plays a dominant role.

Productivity growth over the business cycle: cleansing effects of recessions

This paper investigates the impact of recent recessions on the origins of productivity growth. We show how business cycles affect productivity growth, with particular attention for the impact of job reallocation and labor hoarding. We find evidence that recessions induce productivity enhancing job reallocation in manufacturing but not in services industries and show that labor hoarding mitigates this cleansing effect of recessions. Furthermore, we show how entry and exit of firms and industry dynamics shape the evolution of aggregate productivity.Plain English SummaryDuring recessions, governments support firms via temporary unemployment programs to save jobs. A side effect is that job reallocation and exit of low-productive firms can be distorted, while such cleansing effects typically spur productivity growth. This paper investigates how recessions affect productivity growth, with particular attention for the impact of job reallocation and labor hoarding. We find evidence that recessions induce productivity enhancing job reallocation in manufacturing but not in services industries and show that labor hoarding mitigates this cleansing effect of recessions. Furthermore, we show how entry and exit of firms and industry dynamics shape the evolution of aggregate productivity. As many developed economies struggle with a slowdown in productivity growth, it is important that policy makers understand the impact of recessions on the micro origins of productivity growth and are aware of how temporary policies during recessions could affect long-term productivity growth.

Distribution of COVID-19 government support and its consequences for firm liquidity and solvency.

We utilize several unique firm-level datasets in order to assess the efficiency and effectiveness of the government support aiming to curb the economic consequences of the coronavirus pandemic. The results, drawing on the experience of a small open European country, suggest the distributed COVID-19 subsidies save non-negligible number of jobs and sustain economic activity during the first wave of the pandemic. General distribution rules designed on the fly may bring close to optimal results in terms of the support allocation, as relatively more productive, privately owned, foreign-demand oriented firms are prioritized and firms with a high environmental footprint or zombie firms record a relatively lower chance of obtaining government funding. By assuming constant cost elasticities to sales, we show that the pandemic deteriorates strongly firm profits and increases significantly the share of illiquid and insolvent firms. Government wage subsidies somewhat mitigate firm losses and have statistically significant effect, but relatively mild compared to the size of the economic shock. Our estimates also confirm that larger firms, receiving smaller relative size of the support, have more space to cover their additional liquidity needs by increasing trade liabilities or liabilities to affiliated entities, while SMEs face higher risk of insolvencies.