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The fiscal policy reaction to COVID-19, or the fast way out of the crisis

In: CNB Global Economic Outlook - May 2020

Author

Listed:
  • Petr Polak
  • Lubos Komarek
  • Iveta Polaskova
  • Pavla Netusilova

Abstract

The COVID-19 pandemic has affected the entire world economy. Few countries have escaped being paralysed directly by the illness, but the openness of economies and the close trade links between them and have resulted in serious downturns even in countries with a lower incidence of the disease. Many businesses were forced to shut down overnight, so many parts of the economy have locked up completely. Central banks have eased monetary policy to avert catastrophic effects on the economy and financial stability. Governments are introducing support measures in astronomical amounts to maintain employment and stop households and businesses going under. This article gives an overview of these measures and compares them between countries. We conclude by using two hypothetical cases - moderately (60%) and highly (90%) indebted economies - to illustrate how the pandemic shock may affect countries' fiscal positions for many years to come.

Suggested Citation

  • Petr Polak & Lubos Komarek & Iveta Polaskova & Pavla Netusilova, 2020. "The fiscal policy reaction to COVID-19, or the fast way out of the crisis," Occasional Publications - Chapters in Edited Volumes, in: CNB Global Economic Outlook - May 2020, pages 12-19, Czech National Bank.
  • Handle: RePEc:cnb:ocpubc:geo2020/5
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    File URL: https://www.cnb.cz/export/sites/cnb/en/monetary-policy/.galleries/geo/geo_2020/gev_2020_05_en.pdf
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    References listed on IDEAS

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    1. Sebastian Gechert & Ansgar Rannenberg, 2018. "Which Fiscal Multipliers Are Regime‐Dependent? A Meta‐Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 32(4), pages 1160-1182, September.
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    4. Baum, Anja & Checherita-Westphal, Cristina & Rother, Philipp, 2013. "Debt and growth: New evidence for the euro area," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 809-821.
    5. Dorine Boumans & Sebastian Link & Stefan Sauer, 2020. "Covid-19: The World Economy Needs a Lifeline – But Which One?," EconPol Policy Brief 27, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
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