Ethan Ilzetzki's picture
Affiliation: 
London School of Economics

Voting history

Post Covid-19 Potential Output in the Eurozone

Question 1: How much lower will the potential level of GDP in the Eurozone in 2025 be due to Covid-19 relative to pre-Covid forecasts?

 

Answer:
Between 2% and 5%
Confidence level:
Not confident at all

Question 2: How much lower will the potential growth rate of GDP in the Eurozone in 2025 be due to Covid-19 relative to pre-Covid forecasts?

 

Answer:
No different
Confidence level:
Not confident at all
Comment:
Looking at economic behavior in France and elsewhere when lockdown restrictions were relaxed suggests large pent up demand. I would predict that this will more than outweigh the growth loss due to debt overhang and other accumulated risks during Covid-19.

Lockdowns and UK Economic Performance

Question 3: Using not only the policy tools that have been part of the UK policy mix thus far but also policy tools implemented in other countries, to what extent does the government face a tradeoff between saving lives and preserving livelihoods? 

Answer:
Large tradeoff
Confidence level:
Not confident
Comment:
There is no single answer to this question. There are some policies that can save lives with nearly no economic impact: for example wearing masks, encouraging moderate social distancing, personal hygiene. But Covid-19 spread eventually even where these "low hanging fruit" were broadly followed. This means that to further mitigate Covid's spread, additional measures need to be taken and these appear to be rather costly at least in certain sectors (closing theaters, enforcing 2-meter distancing in restaurants, closing pubs, ect.).

Question 2: How much will the new lockdown measures introduced on Thursday November 5 hurt UK economic activity this year relative to a counterfactual with the milder measures adopted over the summer?

Answer:
Small damage
Confidence level:
Confident
Comment:
I would assess the damages to be small to moderate. Consumption data over the summer both in the UK and in other countries indicate that individuals (particularly young adults) had returned to nearly normal levels of consumption. In other words, there is far less voluntary social distancing than there was at the beginning of the pandemic. This implies a sharper trade-off between the public health and economic objectives than there previously was.

Question 1: How much of the decline in GDP experienced to date would have been avoided in the absence of any lockdown measures or other policy interventions (such as fiscal support)?

Answer:
A small portion of the decline
Confidence level:
Not confident at all
Comment:
Much of the decline in economic activity would have occurred regardless, because of individual's reluctance to consume in sectors where infection and transmission risks were high. Many employers would have imposed voluntary work-from-home regimes. Moreover, the fiscal support will have mitigated some of the economic harm. However, I am sceptical of claims that there was no trade off whatsoever between the health and economic objectives.

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