IDEAS home Printed from https://ideas.repec.org/p/sgh/kaewps/2021060.html
   My bibliography  Save this paper

The Great Lockdown: information, noise and macroeconomic fluctuations

Author

Listed:
  • Michał Brzoza-Brzezina
  • Grzegorz Wesołowski

Abstract

This paper argues that noisy information about lockdown can cause undesired economic fluctuations. We construct a New Keynesian model with imperfect information about how long the lockdown would last. On the one hand, a false information about the lockdown being persistent (which we call fear of lockdown) lowers consumption, investment, employment and output. We show that the fear of lockdown may account for more than half of the decline in economic activity caused by the lockdown itself. On the other hand, a true information about lockdown being introduced can also be misinterpreted and hence cause an impact on the economy being smaller than desired by the authorities. These undesired fluctuations can be reduced if communication about lockdown policy is precise, for which our policy conclusion calls

Suggested Citation

  • Michał Brzoza-Brzezina & Grzegorz Wesołowski, 2021. "The Great Lockdown: information, noise and macroeconomic fluctuations," KAE Working Papers 2021-060, Warsaw School of Economics, Collegium of Economic Analysis.
    • Handle: RePEc:sgh:kaewps:2021060
    as

    Download full text from publisher

    File URL: http://kolegia.sgh.waw.pl/pl/KAE/Documents/WorkingPapersKAE/WPKAE_2021_060.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    Covid-19; lockdown; communication; imperfect information;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sgh:kaewps:2021060. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dariusz Nojszewski (email available below). General contact details of provider: https://edirc.repec.org/data/kawawpl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.