Modern Pandemics: Recession and Recovery

68 Pages Posted: 15 Apr 2020 Last revised: 19 Mar 2021

See all articles by Chang Ma

Chang Ma

Fudan University - Fanhai International School of Finance (FISF)

John H. Rogers

Board of Governors of the Federal Reserve System

Sili Zhou

Fudan University - Fanhai International School of Finance (FISF)

Date Written: June 1, 2020

Abstract

We examine the immediate and bounce-back effects from six modern health crises: 1968 Flu, SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014), and Zika (2016). Time-series models for a large cross-section of countries indicate that real GDP growth falls by around two percentage points in affected countries relative to unaffected countries in the year of the outbreak. Bounce-back in GDP growth is rapid, but output is still below pre-shock level five years later. Unemployment for less educated workers is higher and exhibits more persistence, and there is significantly greater persistence in female unemployment than male. Moreover, the negative effects of pandemics are economically contagious — indirect effects on own-country GDP from affected trading partners are significant for both the initial GDP decline and the positive bounce back. However, the negative effects on GDP and unemployment are felt less in countries with larger first-year responses in government spending, especially on health care. Our estimates imply that the impact effect of the Covid-19 shock on world GDP growth is approximately four standard deviations worse than the average past pandemic.

Keywords: Health crises; COVID-19; Output loss; Unemployment; Trade network; Fiscal policy

JEL Classification: I10, E60, F40

Suggested Citation

Ma, Chang and Rogers, John H. and Zhou, Sili, Modern Pandemics: Recession and Recovery (June 1, 2020). Available at SSRN: https://ssrn.com/abstract=3565646 or http://dx.doi.org/10.2139/ssrn.3565646

Chang Ma (Contact Author)

Fudan University - Fanhai International School of Finance (FISF) ( email )

China

John H. Rogers

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Sili Zhou

Fudan University - Fanhai International School of Finance (FISF) ( email )

220 Handan Road
Shanghai, 200433
China

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