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A Note on Hibernation in a Lockdown

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  • Federico Sturzenegger

    (Universidad de San Andres)

Abstract

Discussion on the optimal fiscal response to lockdowns is just starting. In this note, we make a simple yet apparently ignored point. If a lockdown entails a reduction in the desire for consumption the optimal response is to reduce consumption, a response that I call "hibernation". In this case, attempts to smooth the effect of the lockdown, which has been the almost universal recommendation to deal with Covid-19, leads to welfare losses.

Suggested Citation

  • Federico Sturzenegger, 2020. "A Note on Hibernation in a Lockdown," Working Papers 9, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:9
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    Cited by:

    1. Ricardo Hausmann & Ulrich Schetter, 2020. "Horrible Trade-offs in a Pandemic: Lockdowns, Transfers, Fiscal Space, and Compliance," CID Working Papers 382, Center for International Development at Harvard University.

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