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The Effects of Fiscal Measures During COVID-19

Authorized for distribution by Jona than D. Ostry.

WP/21/262

Pragyan Deb, Davide Furceri, Jonathan D. Ostry, Nour Tawk, and Naihan Yang.

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

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We thank Swarnali Ahmed Hannan, John Bluedorn, Lone Christiansen, Enrique Flores, Jean-Marc Fournier, Raphael Lam, Giacomo Magistretti, and seminar participants at the IMF for helpful comments and suggestions. The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

The Effects of Fiscal Measures During COVID-19
Author: Mr. Pragyan Deb, Davide Furceri, Mr. Jonathan David Ostry, Nour Tawk, and Naihan Yang