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Estimating the economic cost of the COVID-19 pandemic

Author

Listed:
  • Azhar Iqbal

    (Wells Fargo’s Corporate and Investment Bank)

  • Sam Bullard

    (Wells Fargo’s Corporate and Investment Bank)

Abstract

Our study presents a framework to estimate economic costs of the COVID-19 pandemic for the U.S. economy. We characterize whether the pandemic-related damages are short-lived or long-lasting. The potential damages are estimated in terms of losses in eight major variables, including employment, consumption, and GDP. To estimate damages from the pandemic, we utilize the pre-COVID potential level of the target variables, GDP for example, as a benchmark and compare these estimates with those that are calculated during the COVID pandemic. Our study suggests damages from the pandemic are not short-lived as the major sectors have shifted to a lower growth trajectory compared to the pre-COVID growth path. Focusing only on the real GDP level would paint an illusion of a stronger recovery back to the “normal.” Furthermore, the illusion of a stronger recovery may lead to a sooner-than-appropriate policy normalization.

Suggested Citation

  • Azhar Iqbal & Sam Bullard, 2021. "Estimating the economic cost of the COVID-19 pandemic," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(4), pages 212-216, October.
    • Handle: RePEc:pal:buseco:v:56:y:2021:i:4:d:10.1057_s11369-021-00240-5
    DOI: 10.1057/s11369-021-00240-5
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    References listed on IDEAS

    as
    1. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    2. Patrice Ollivaud & David Turner, 2015. "The effect of the global financial crisis on OECD potential output," OECD Journal: Economic Studies, OECD Publishing, vol. 2014(1), pages 41-60.
    3. Laurence Ball, 2014. "Long-term damage from the Great Recession in OECD countries," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 149-160, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    COVID-19; Economic cost; Output; Employment; Policy-errors;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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