The Economic Effects of COVID-19 Containment Measures

IMF Working Papers, August 7, 2020

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Containment measures are crucial to halt the spread of the 2019 COVID-19 pandemic but entail large short-term economic costs.
The paper quantifies these effects using daily global data on real-time containment measures and indicators of economic activity.

Containment measures have had, on average, a very large impact on economic activity—equivalent to a loss of about 15 percent in industrial production over a 30-day period following their implementation.
Fiscal and monetary policy measures used in response to the crisis were effective in mitigating some of these economic costs.
Workplace closures and stay-at-home orders are more effective in curbing infections but are associated with the largest economic costs.
Easing of containment measures has led to a pickup in economic activity, but the effect has been lower (in absolute value) than that from the tightening of measures.

Deploy fiscal and monetary policy measures to mitigate the short-term economic costs of containment measures, as evidence indicates these policies can be effective.
Recognize trade-offs between public-health effectiveness and economic costs: workplace closures and stay-at-home orders reduce infections most effectively but impose the largest economic costs.
Consider the asymmetry in effects: tightening containment yields larger absolute economic impacts than easing, implying cautious calibration of both implementation and removal of measures.

Source: The Economic Effects of COVID-19 Containment Measures, IMF Working Paper (August 7, 2020).