Working Paper: CEPR ID: DP16726
Authors: Pragyan Deb; Davide Furceri; Jonathan D. Ostry; Nour Tawk; Naihan Yang
Abstract: This paper empirically examines the effects of fiscal policy measures during the COVID-19 pandemic, using a novel database of daily fiscal policy announcements—classified by type of fiscal measure—and high-frequency economic indicators for 52 countries from January 1 to December 31, 2020. The results suggest that fiscal policy announcements have been effective in stimulating economic activity, boosting confidence, and reducing unemployment, but their effect varies by type of measure and country characteristics. Emergency lifeline measures (which form the bulk of below-the-line measures) are more effective when containment policies are stringent, providing cashflow support to firms and households. Demand-support measures (which comprise most of above-the-line measures) are more effective when containment measures are relaxed.
Keywords: Fiscal policy; COVID-19; Multipliers; High-frequency data
JEL Codes: E24; E32; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal policy announcements (E62) | Economic activity (E29) |
| Fiscal policy announcements (E62) | Industrial production (L69) |
| Fiscal policy announcements (E62) | Stock market indicators (G10) |
| Fiscal policy announcements (E62) | Domestic currency appreciation against the US dollar (F31) |
| Fiscal policy announcements (E62) | Manufacturing Purchasing Managers' Index (PMI) (L60) |
| Fiscal policy announcements (E62) | Unemployment rate (J64) |
| Emergency lifeline measures (H12) | Economic activity (E29) |
| Demand support measures (J23) | Economic activity (E29) |
| Country characteristics (O57) | Impact of fiscal policy measures (E62) |