How to Deal with a Coronavirus Economic Recession?

Popov, Vladimir (2020): How to Deal with a Coronavirus Economic Recession?

Abstract

2020 world economic downturn associated with the restrictions intended to fight COVID-19 pandemic is a structural recession caused by adverse supply shock. It is similar to recessions caused (or aggravated) by post war conversion of defense industries, by oil price shocks (1973, 1979, 2007), and by the transition to the market in post-communist countries in the 1990s (transformational recession). Whereas traditional Keynesian policy (absorption of adverse supply shock by means of expansionary fiscal and monetary policy) can help, best results are achieved by government industrial policies promoting restructuring – transferring resources (capital and labor) from the contracting industries to the expanding. The experience of China and some other East Asian countries that seem to be more successful in overcoming the coronavirus recession provides additional evidence.

• Item Type: MPRA Paper
• Language: English
• Keywords: Structural recession, adverse supply shock, demand shock, conventional Keynesian response to recession,restructuring, industrial policy
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O25 - Industrial Policy; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General; P - Economic Systems > P5 - Comparative Economic Systems > P51 - Comparative Analysis of Economic Systems

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