TDRI QUARTERLY REVIEW

Volume 37, No. 01, Month MARCH, Year 2022, Pages 1 - 16

Short-term economic impact of policy responses to the covid-19 pandemic cross-country regression

Thammarat Bunjaroenphornsuk, Nonarit Bisonyabut

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The novel coronavirus (severe acute respiratory syndrome coronavirus 2, or SARSCoV- 2), which has caused the COVID-19 pandemic, precipitated a major global crisis not seen in over a century. In less than two months, the coronavirus had spread to more than 100 countries, resulting in about 1 million infections and a considerable number of deaths globally. Despite having a lower fatality rate than SARS, MERS, and Ebola, SARSCoV- 2 infects humans faster than other hazardous virus. The number of cases and deaths had reached roughly 140 million and 3 million, respectively, by the middle of April 2021.1 As a result of the disconcerting rates of human suffering, several governments implemented unprecedented non-pharmaceutical interventions to suppress the spread and limit the loss, including broad and targeted lockdowns, border restrictions, and such smart strategies as diagnostic testing, contact tracing, and isolation, as well as social distancing and the wearing of face masks. Their effectiveness in compromising the severity of the pandemic has been empirically recognized in the epidemiological literature (Anderson et al., 2020; Cowling et al., 2020). Aside from the health and life concerns, the pandemic has had a devastating negative impact on the global economy in a variety of ways. First, COVID-19 infections cause a substantial decline in the workforces because many employees and workers must be isolated or hospitalized, implying a supply constraint. Second, stringent measures to prevent contagion from overwhelming the capacity of a country’s healthcare system, such as social distancing, lockdowns, and quarantines, ultimately impede a large amount of economic activity. The sudden disruption triggers a vicious cascading chain: workplace and factory closures, layoffs, income declines, spending cuts, and suspended investment (Eichenbaum et al., 2020; Gourinchas, 2020). Third, the shock amplifies pressure on borrowing costs

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