The Unassuming Economist

Source: CESifo

In a new paper (2022), economists Davide Furceri, Prakash Loungani, Jonathan D. Ostry, and Pietro Pizzuto write about the challenges of ensuring sustainable levels of debt in the face of threats of rising inequality, low growth, and high unemployment, posed by the COVID-19 crisis.

Studying five major epidemics since the 2000s, they demonstrate that real GDP falls in the aftermath of a pandemic while inequality (as measured by the Gini coefficient) shoots up (Figure 1). Subsequently, they discuss the role of fiscal policy in managing inequality and the need to avoid hastening or prolonging generous support beyond need using appropriate policy measures.