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Real-Time Estimation of the Short-Run Impact of COVID-19 on Economic Activity Using Electricity Market Data

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  • Carlo Fezzi

    (University of Trento
    University of Exeter Business School)

  • Valeria Fanghella

    (University of Trento)

Abstract

In response to the COVID-19 emergency, many countries have introduced a series of social-distancing measures including lockdowns and businesses’ shutdowns, in an attempt to curb the spread of the infection. Accordingly, the pandemic has been generating unprecedented disruption on practically every aspect of society. This paper demonstrates that high-frequency electricity market data can be used to estimate the causal, short-run impacts of COVID-19 on the economy, providing information that is essential for shaping future lockdown policy. Unlike official statistics, which are published with a delay of a few months, our approach permits almost real-time monitoring of the economic impact of the containment policies and the financial stimuli introduced to address the crisis. We illustrate our methodology using daily data for the Italian day-ahead power market. We estimate that the 3 weeks of most severe lockdown reduced the corresponding Italian Gross Domestic Product (GDP) by roughly 30%. Such negative impacts are now progressively declining but, at the end of June 2020, GDP is still about 8.5% lower than it would have been without the outbreak.

Suggested Citation

  • Carlo Fezzi & Valeria Fanghella, 2020. "Real-Time Estimation of the Short-Run Impact of COVID-19 on Economic Activity Using Electricity Market Data," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 885-900, August.
  • Handle: RePEc:kap:enreec:v:76:y:2020:i:4:d:10.1007_s10640-020-00467-4
    DOI: 10.1007/s10640-020-00467-4
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    References listed on IDEAS

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    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Health > Distancing and Lockdown > Effect on Economy

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    2. Jan Niklas Buescher & Daria Gottwald & Florian Momm & Alexander Zureck, 2022. "Impact of the COVID-19 Pandemic Crisis on the Efficiency of European Intraday Electricity Markets," Energies, MDPI, vol. 15(10), pages 1-21, May.
    3. Abel Brodeur & David Gray & Anik Islam & Suraiya Bhuiyan, 2021. "A literature review of the economics of COVID‐19," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1007-1044, September.
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    5. Galdi, Giulio & Casarin, Roberto & Ferrari, Davide & Fezzi, Carlo & Ravazzolo, Francesco, 2023. "Nowcasting industrial production using linear and non-linear models of electricity demand," Energy Economics, Elsevier, vol. 126(C).
    6. Jasper Verschuur & Elco E Koks & Jim W Hall, 2021. "Global economic impacts of COVID-19 lockdown measures stand out in high-frequency shipping data," PLOS ONE, Public Library of Science, vol. 16(4), pages 1-16, April.
    7. Olympia Bover & Natalia Fabra & Sandra García-Uribe & Aitor Lacuesta & Roberto Ramos, 2023. "Firms and Households during the Pandemic: What Do We Learn from Their Electricity Consumption?," The Energy Journal, , vol. 44(3), pages 267-288, May.
    8. Tung Le Thanh, 2022. "Relationship between the COVID-19 pandemic and the macroeconomic indicators: Evidence from a global analysis," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 16(1), pages 785-791, August.
    9. Ai, Hongshan & Zhong, Tenglong & Zhou, Zhengqing, 2022. "The real economic costs of COVID-19: Insights from electricity consumption data in Hunan Province, China," Energy Economics, Elsevier, vol. 105(C).
    10. Werth, Annette & Gravino, Pietro & Prevedello, Giulio, 2021. "Impact analysis of COVID-19 responses on energy grid dynamics in Europe," Applied Energy, Elsevier, vol. 281(C).
    11. Fezzi, Carlo & Fanghella, Valeria, 2021. "Tracking GDP in real-time using electricity market data: Insights from the first wave of COVID-19 across Europe," European Economic Review, Elsevier, vol. 139(C).
    12. Malaczewska Paulina & Malaczewski Maciej, 2022. "Marriage, divorce and coronavirus—theoretical analysis of the influence of COVID-19 on family capital," Economics and Business Review, Sciendo, vol. 8(3), pages 126-142, October.
    13. Lazo, Joaquín & Aguirre, Gerson & Watts, David, 2022. "An impact study of COVID-19 on the electricity sector: A comprehensive literature review and Ibero-American survey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    14. Guglielmo Maria Caporale & Abdurrahman Nazif Catik & Mohamad Husam Helmi & Coskun Akdeniz & Ali Ilhan, 2021. "The Effects of the Covid-19 Pandemic on Stock Markets, CDS and Economic Activity: Time-Varying Evidence from the US and Europe," CESifo Working Paper Series 9316, CESifo.
    15. Mauritzen, Johannes, 2021. "The Covid-19 shock on a low-carbon grid: Evidence from the nordics," Energy Policy, Elsevier, vol. 156(C).
    16. Chen Zhu & Rigoberto A. Lopez & Yuan Gao & Xiaoou Liu, 2021. "The COVID‐19 Pandemic and Consumption of Food away from Home: Evidence from High‐frequency Restaurant Transaction Data," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(6), pages 73-94, November.
    17. Guglielmo Maria Caporale & Abdurrahman Nazif Çatık & Mohamad Husam Helmi & Coşkun Akdeniz & Ali İlhan, 2024. "Time-varying effects of the COVID-19 pandemic on stock markets and economic activity: evidence from the US and Europe," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(2), pages 529-558, May.
    18. García, Sebastián & Parejo, Antonio & Personal, Enrique & Ignacio Guerrero, Juan & Biscarri, Félix & León, Carlos, 2021. "A retrospective analysis of the impact of the COVID-19 restrictions on energy consumption at a disaggregated level," Applied Energy, Elsevier, vol. 287(C).
    19. Jacek Artur Strojny & Michał Stanisław Chwastek & Elżbieta Badach & Sławomir Jacek Lisek & Piotr Kacorzyk, 2022. "Impacts of COVID-19 on Energy Expenditures of Local Self-Government Units in Poland," Energies, MDPI, vol. 15(4), pages 1-25, February.
    20. Cerqueira, Pedro André & Pereira da Silva, Patrícia, 2023. "Assessment of the impact of COVID-19 lockdown measures on electricity consumption – Evidence from Portugal and Spain," Energy, Elsevier, vol. 282(C).
    21. Luis M. Abadie, 2021. "Energy Market Prices in Times of COVID-19: The Case of Electricity and Natural Gas in Spain," Energies, MDPI, vol. 14(6), pages 1-17, March.
    22. Gagnon, Joseph E. & Kamin, Steven B. & Kearns, John, 2023. "The impact of the COVID-19 pandemic on global GDP growth," Journal of the Japanese and International Economies, Elsevier, vol. 68(C).
    23. Barbara Kowal & Robert Ranosz & Łukasz Herezy & Wojciech Cichy & Olga Świniarska & Lucia Domaracka, 2022. "Overview of Taken Initiatives and Adaptation Measures in Polish Mining Companies during a Pandemic," Energies, MDPI, vol. 15(17), pages 1-20, September.
    24. Enza Simeone, 2024. "Assessing the effect of the COVID-19 pandemic on wellbeing: a comparison between CBA and SWF approaches for policies evaluation," Working Papers 662, ECINEQ, Society for the Study of Economic Inequality.

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