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International Monetary Fund. European Dept.

deeper fall in activity than emerging market economies (EE), which were caught later by the pandemic and reacted more quickly. Because of the strong policy response, the drop in employment and rise in unemployment rates—relative to the contraction in output— have been appreciably less than they were during the GFC, although the pandemic’s full impact on labor markets will likely appear with some delay. Nonetheless, immediate job and income losses would have been much larger without the job-retention programs that subsidized wages and shorter work hours. In the euro

International Monetary Fund. European Dept.

European firms are facing an unprecedented shock, but the policy response has also been unprecedented. This chapter seeks to quantify the potential impact of the coronavirus disease (COVID-19) crisis on corporate liquidity and solvency risks in Europe and examine the extent to which policy measures—as designed—could dampen these risks in 2020. Using detailed balance sheet and income statement data for millions of European companies, the chapter finds that job-retention programs, debt moratoria, grants, and loan guarantees could be effective in addressing

International Monetary Fund. European Dept.

Abstract

The COVID-19 pandemic has caused dramatic loss of human life and major damage to the European economy, but thanks to an exceptionally strong policy response, potentially devastating outcomes have been avoided.

International Monetary Fund. European Dept.

Abstract

Bertrand Gruss (co-lead), Carlos Mulas-Granados, Manasa Pat-nam (co-lead), and Sebastian Weber prepared this chapter under the supervision of Enrica Detragiache and the guidance of Jeffrey Franks. Zan Jin provided excellent research support.

International Monetary Fund. Middle East and Central Asia Dept.

downside risks and significant economic slack remains, presenting risks of economic scarring. In the near term, a key priority is to entrench the still-nascent recovery, arrest high unemployment, and protect the most vulnerable. Continued donor support will be critical to help address Jordan’s external financing needs and shoulder the disproportionate burden Jordan bears in hosting refugees. The fiscal targets for 2022 have been amended to ensure adequate space for the extension of important social protection and job retention programs and for priority public

International Monetary Fund. Asia and Pacific Dept

on labor market aggregates has been relatively small so far. The aggregate unemployment rate increased modestly to 4.9 percent in 2020Q4 from 4.1 percent in 2019Q4, while the underutilization rate increased more sharply from 10.1 percent in 2019Q4to 11.9 percent in 2020Q4. New Zealand Introduced a Large Job Retention Program During the Pandemic (Workers receiving job retention benefits, percent) Source: OECD. Labor Market Conditions Have Deteriorated Somewhat Since the Onset of the Pandemic (Unemployment rate and underutilization rate, percent

International Monetary Fund. Western Hemisphere Dept.

strong recovery that has been under way since the second half of last year. Unfortunately, a second wave of Covid-19 in the first quarter of 2021 posed additional challenges to this process. A new round of policy measures effectively countered the social and economic fallout of the second wave of Covid-19 . Among the actions taken, a new, better targeted round of emergency aid was provided, the job retention program was relaunched, measures to secure budgetary resources and a more expeditious process for the acquisition of equipment and inputs in the fight against

Mr. Shekhar Aiyar and Mai Dao
Kurzarbeit (KA), Germany’s short-time work program, is widely credited with saving jobs and supporting domestic demand during the COVID-19 recession. We quantify the impact by exploiting state-level variation in exposure to the pandemic shock and KA take-up. We construct a shift-share measure of the labor demand shock and instrument KA take-up using the pre-existing, state-specific share of workers eligible for KA. We find, first, that KA was crucial in mitigating unemployment: absent its expansion the unemployment rate would have increased by an additional 3 pp on average at the trough of the recession. Second, KA also bolstered domestic demand: the contraction in consumption could have been 2 to 3 times larger absent the program. Finally, we provide preliminary evidence on the sensitivity of the medium-run reallocation of resources to the prevalence of jobretention schemes during the Global Financial Crisis.
Mr. Shekhar Aiyar and Mai Dao

benefits. These institutions not only have a direct effect on unemployment, but more importantly, will tend to affect the relationship between unemployment and take-up of the job-retention program. Studies using firm-level data for a single country or region also face several challenges. First, many firm-level datasets, such as ORBIS, are weighted towards manufacturing and towards larger firms, with much poorer coverage for the smaller, service industry firms that tend to be hard hit by economic downturns, most especially the Covid-19 recession. Country