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Is There a Trade‐Off between COVID‐19 Control and Economic Activity? Implications from the Phillips Curve Debate

Author

Listed:
  • Mitsuhiro Fukao
  • Etsuro Shioji

Abstract

In this paper, we argue that the roles of public policies concerning COVID‐19 can be better understood in light of the past discussions on the Great Inflation of the 1970s and the 1980s. Like the Phillips Curve in macroeconomics, the pandemic presents a trade‐off between economic activities and something undesirable, which is, in this case, infection. Like the Phillips Curve, this apparent output‐infection trade‐off is an elusive one and it is lost in the long run. Containing infections calls for decisive policy action. This paper shows that we could design a reaction function, which sets the level of economic activity as a function of the state of infection, in such a way that the possibility of an infection explosion would be eliminated. Our empirical analysis suggests that Tokyo, New York, and London since September 2020 do not satisfy this desirable property.

Suggested Citation

  • Mitsuhiro Fukao & Etsuro Shioji, 2022. "Is There a Trade‐Off between COVID‐19 Control and Economic Activity? Implications from the Phillips Curve Debate," Asian Economic Policy Review, Japan Center for Economic Research, vol. 17(1), pages 66-85, January.
    • Handle: RePEc:bla:asiapr:v:17:y:2022:i:1:p:66-85
    DOI: 10.1111/aepr.12361
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    Cited by:

    1. Jonathan Skinner, 2022. "Comment on “Is there a Trade‐off between Covid‐19 Control and Economic Activity? Implications from the Phillips Curve Debate”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 17(1), pages 86-87, January.
    2. Shibamoto, Masahiko & Hayaki, Shoka & Ogisu, Yoshitaka, 2022. "COVID-19 infection spread and human mobility," Journal of the Japanese and International Economies, Elsevier, vol. 64(C).
    3. Hongtao Li & Taisuke Nakata & Hiroki Sakamoto & Hiroyuki Uneya, 2026. "Lockdown Policy Rules with a Hospital Capacity Constraint," CARF F-Series CARF-F-620, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    4. Ueda, Kozo, 2024. "Household spending responses to two-time COVID-19 payments," Japan and the World Economy, Elsevier, vol. 72(C).
    5. Hiroaki MASUHARA & Kei HOSOYA, 2022. "What Impacts Do Human Mobility and Vaccination Have on Trends in COVID-19 Infections? Evidence from four developed countries," Discussion papers 22087, Research Institute of Economy, Trade and Industry (RIETI).
    6. Takatoshi Ito & Kazumasa Iwata & Colin McKenzie & Haruko Noguchi & Shujiro Urata, 2022. "The COVID‐19 Pandemic and Asia: Editors' Overview," Asian Economic Policy Review, Japan Center for Economic Research, vol. 17(1), pages 1-17, January.
    7. Wenxuan Chen & Songlei Chao & Jianliang Ye, 2023. "The micro-economic effects of COVID-19 containment measures: A simple model and evidence from China," PLOS ONE, Public Library of Science, vol. 18(7), pages 1-27, July.
    8. Beppu, Shotaro & Fujii, Daisuke & Kubota, Hiroyuki & Machi, Kohei & Maeda, Yuta & Nakata, Taisuke & Shibuya, Haruki, 2023. "Cross-regional heterogeneity in health and economic outcomes during the COVID-19 pandemic: An analysis of Japan," Journal of the Japanese and International Economies, Elsevier, vol. 70(C).

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