The COVID-19 crisis: what explains cross-country differences in the pandemic’s short-term economic impact?

Niermann, Lennart and Pitterle, Ingo A. (2021): The COVID-19 crisis: what explains cross-country differences in the pandemic’s short-term economic impact? Published in: UN Department of Economic and Social Affairs (DESA) Working Papers No. WP 174 (10 August 2021)

Abstract

The COVID-19 pandemic has caused the most universal health and socio-economic crisis in recent history. However, the magnitude of the economic damage has differed widely; some countries were hit particularly hard, while others have managed to weather the storm much better. In this paper, we employ a cross-country analysis to identify factors that help explain the differences in the growth impact of the COVID-19 shock. Our findings underscore the critical role of balancing health and economic concerns in managing the pandemic as both a country’s exposure to the coronavirus and the stringency of containment measures are strongly correlated with its growth performance. In addition, our results shed light on several aspects of economic resilience. Good governance, provision of fiscal support and strong macroeconomic fundamentals all helped cushion the economic impact. By contrast, a lack of economic diversification – reflected in overreliance on the tourism sector or oil production – has significantly amplified the shock.

• Item Type: MPRA Paper
• Language: English
• Keywords: COVID-19; growth performance; transmission of shocks; economic resilience
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E66 - General Outlook and Conditions; H - Public Economics > H1 - Structure and Scope of Government > H12 - Crisis Management; H - Public Economics > H5 - National Government Expenditures and Related Policies > H51 - Government Expenditures and Health; H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt; I - Health, Education, and Welfare > I1 - Health > I15 - Health and Economic Development; I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

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