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International Monetary Fund. African Dept.
The Ugandan authorities reacted swiftly to the COVID-19 crisis, locking down the economy, saving lives and avoiding a public health crisis. However, the resulting economic and social costs have been high. Per capita GDP growth remains below pre-pandemic levels, poverty gains have been reversed, fiscal balances have deteriorated, and pressures on external buffers remain high.
Mr. Francesco Grigoli and Evgenia Pugacheva
The COVID-19 pandemic altered consumption patterns significantly in a short period of time. However, official inflation statistics take time to reflect these changes in the weights of the CPI consumption basket. Using credit card data for the UK and Germany, we document how consumption patterns changed and we quantify the resulting inflation bias. We find that consumers experienced a higher level of inflation at the beginning of the pandemic than what a fixed-weight inflation (or the official-weight) index suggests and a lower inflation thereafter. We also show that weights can differ among age groups as well as between in-person and online spenders. These differences affect the purchasing power of the population heterogeneously. We conclude that CPI inflation indexes based on frequently updated weights can provide useful inputs to assess changes in the cost of living and, if shifts in consumption patterns prove persistent, determine the need to introduce new official weights and inform monetary policy.
Mr. Francesco Caselli, Mr. Francesco Grigoli, Weicheng Lian, and Mr. Damiano Sandri
Using high-frequency proxies for economic activity over a large sample of countries, we show that the economic crisis during the first seven months of the COVID-19 pandemic was only partly due to government lockdowns. Economic activity also contracted because of voluntary social distancing in response to higher infections. We also show that lockdowns can substantially reduce COVID-19 infections, especially if they are introduced early in a country's epidemic. Despite involving short-term economic costs, lockdowns may thus pave the way to a faster recovery by containing the spread of the virus and reducing voluntary social distancing. Finally, we document that lockdowns entail decreasing marginal economic costs but increasing marginal benefits in reducing infections. This suggests that tight short-lived lockdowns are preferable to mild prolonged measures.
Michal Brzoza-Brzezina, Marcin Kolasa, and Krzysztof Makarski
We study the macroeconomic effects of the COVID-19 epidemic in a quantitative dynamic general equilibrium setup with nominal rigidities. We evaluate various containment policies and show that they allow to dramatically reduce the welfare cost of the disease. Then we investigate the role that monetary policy, in its capacity to manage aggregate demand, should play during the epidemic. According to our results, treating the observed output contraction as a standard recession leads to overly expansionary policy. Finally, we check how central banks should resolve the trade-off between stabilizing the economy and containing the epidemic. If no administrative restrictions are in place, the second motive prevails and, despite the deep recession, optimal monetary policy is in fact contractionary. Conversely, if sufficient containment measures are introduced, central bank interventions should be expansionary and help stabilize economic activity.
Mr. Francesco Caselli, Mr. Francesco Grigoli, Mr. Damiano Sandri, and Mr. Antonio Spilimbergo
Lockdowns and voluntary social distancing led to significant reduction in people’s mobility. Yet, there is scant evidence on the heterogeneous effects across segments of the population. Using unique mobility indicators based on anonymized and aggregate data provided by Vodafone for Italy, Portugal, and Spain, we find that lockdowns had a larger impact on the mobility of women and younger cohorts. Younger people also experienced a sharper drop in mobility in response to rising COVID-19 infections. Our findings, which are consistent across estimation methods and robust to a variety of tests, warn about a possible widening of gender and inter-generational inequality and provide important inputs for the formulation of targeted policies.
International Monetary Fund. Western Hemisphere Dept.
Jamaica was hit hard by the pandemic. An early lockdown in the Spring of 2020 helped contain the number of Covid-19 cases but the impact on the economy was severe, with real GDP shrinking by 10 percent. To counter the social and economic effects of the pandemic, the government temporarily reduced the fiscal balance target from +0.7 to -3 percent of GDP, increased spending on health and social protection and reduced the VAT rate. The central bank injected liquidity and encouraged loan moratoria to provide temporary support to the private sector. Growth is expected to rebound to 4.7 percent in 2021 and 4.3 percent in 2022. Downside risks to the outlook are significant, notably from Covid-19.
International Monetary Fund. African Dept.

.5 percent, its lowest historical level under the inflation targeting framework. Staff supports the BOU’s accommodative monetary policy stance in view of the downside risks to inflation, mainly reflecting the recently introduced lockdown, negative output gap, and uncertainties surrounding economic activity. 4. The COVID-19-related expenditure audit report for the first three quarters of FY20/21 has been finalized . This audit, which was completed under difficult circumstances, as the Office of the Auditor General staff was battling COVID-19, will be published after its

International Monetary Fund. Western Hemisphere Dept.

strongly committed to reducing debt to 60 percent of GDP by FY2027/28. Recent Developments, Economic Outlook, and Risks Jamaica has been severely affected by the pandemic with GDP contracting by 10 percent in 2020 (-11% in FY20/21), mainly reflecting the sharply negative impact on tourism and related industries of widespread travel restrictions. This occurred despite the swift reaction of the Jamaican authorities who introduced lockdowns and other public health actions and provided significant macroeconomic policy support and measures to protect the financial

Mr. Francesco Grigoli and Evgenia Pugacheva

underweight cheaper items, effectively producing an upward inflation bias. Similarly, consumers may react to shocks that put a hard constraint on what goods and services they can purchase. COVID-19 is a case in point, as it forced consumers to switch across consumption categories ( Baker et al., 2020 ; Surico, Känzig and Hoke, 2020 ; Tenreyro, 2020 ) and to favor e-commerce ( Alcedo et al., 2022 ). As households responded to the spread of the virus by self-isolating and governments introduced lockdown measures, consumers significantly changed their consumption patterns

Mr. Francesco Caselli, Mr. Francesco Grigoli, Weicheng Lian, and Mr. Damiano Sandri

-19 cases were still low witnessed considerably fewer infections during the first three months of the epidemic relative to countries that introduced lockdowns when cases were already high. 4 Nonlinear Effects of Lockdowns So far, we used a lockdown stringency index that combines a broad range of underlying measures. These includes for example travel restrictions, school and workplace closures, and stay-at-home orders, among others. Disentangling the effects of these measures is an arduous task because they are highly correlated, as countries often introduced