In the charts below, we use the estimated models to decompose the trajectory of industrial production over the course of 2020 into the contributions of the explanatory variables. We estimated this model separately for the richest, poorest, and middle thirds of the countries in our sample (see our paper for country lists), and we found important differences in how the pandemic affected economic activity in these groups. (To address the endogeneity of pandemic deaths and lockdown restrictions with respect to shocks to economic activity, we used a two-stage least squares procedure described in our paper.) Finally, even countries that were not hard-hit by the virus itself might have suffered its economic fallout through the collapse in world trade to measure this effect, we include merchandise exports in our model. Similarly, an increase in lockdown restrictions would also be expected to lower IP. All else equal, a rise in pandemic deaths would be expected to lower IP, both by inducing supply shortages and by prompting an increase in social distancing that leads production to be scaled back. The domestic pandemic measures include deaths per 1,000 of the population and a measure of the stringency of lockdown restrictions, the Oxford Stringency Index (OSI). We estimated panel data regressions of the monthly growth in IP on several measures of the pandemic for 58 countries between March and December 2020. We apply our analysis to a number of critical questions: Did COVID-19 depress output mainly through lockdowns or voluntary social distancing? How did these effects differ among different economies? How large a role was played by the collapse in global trade? My recent research with John Kearns makes a novel contribution by analyzing the impact of pandemic variables on an actual measure of economic activity - industrial production (IP) - across a wide range of economies. (2021), these focus mainly on daily proxies for economic activity - e.g., atmospheric emissions and cellphone-based mobility data - rather than actual production measures. 2021) draw on the full range of economic experiences around the world. 2020, IMF 2020, Maloney and Taskin 2020, Furceri et al. But only a few of these papers ( Deb et al. A plethora of research has emerged to study the channels through which the pandemic has affected economic activity, using a wide range of different methodologies: production-based or computable general equilibrium (CGE) models, epidemiological models, event studies, and broader panel data analyses. The COVID-19 pandemic triggered the sharpest downturn in the world economy since the Great Depression. The views presented represent those of the authors, and not necessarily those of the institutions the authors are affiliated with. Today, we are pleased to present a guest contribution by Steven Kamin (AEI), formerly Director of the Division of International Finance at the Federal Reserve Board.
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