BOFIT Discussion Papers (1999- )


BOFIT Discussion Papers is a series devoted to academic studies by BOFIT economists and guest researchers. The focus is on works relevant for economic policy and economic developments in transition / emerging economies. >> More information.

Recent Submissions

  • Ma, Chang; Rogers, John; Zhou, Sili (2020)
    BOFIT Discussion Papers 16/2020
    We examine the immediate effects and bounce-back 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 three 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. The negative effects on GDP and unemployment are felt less in countries with larger first-year responses in government spending, especially on health care. Affected countries’ consumption declines, investment drops sharply, and international trade plummets. Bounce-back in these expenditure categories is also rapid but not by enough to restore pre-shock trends. Furthermore, indirect effects on own-country GDP from affected trading partners are significant for both the initial GDP decline and the positive bounce back. We discuss why our estimates are a lower bound for the global economic effects of COVID-19 and compare contours of the current pandemic to the historical episodes.
  • Ru, Hong; Yang, Endong; Zou, Kunru (2020)
    BOFIT Discussion Papers 15/2020
    This paper documents a strong delayed response to COVID-19, which is caused by the SARS-CoV2 virus in countries that did not encounter the SARS disease in 2003. The SARS outbreak was caused by a similar virus, SARS-CoV-1. Individuals in countries that developed SARS infections in 2003 search more intensively for COVID-19-related information on Google during the first outbreak of COVID-19 in Wuhan, China, in late January 2020. Governments in countries that have not experienced SARS respond significantly slower in implementing containment measures to combat COVID-19 than countries that have experienced SARS. Furthermore, the timely responses of individuals and governments are more pronounced in countries that reported deaths caused by SARS, which left deeper imprints. Consequently, COVID-19 case numbers and mortalities have been substantially higher in countries that did not experience SARS deaths. Our findings suggest that the imprint of the early experience of similar viruses is a fundamental mechanism underlying timely responses to COVID-19.
  • Aksoy, Cevat Giray; Eichengreen, Barry; Saka, Orkun (2020)
    BOFIT Discussion Papers 14/2020
    What will be political legacy of the Coronavirus pandemic? We find that epidemic exposure in an individual’s “impressionable years” (ages 18 to 25) has a persistent negative effect on confidence in political institutions and leaders. We find similar negative effects on confidence in public health systems, suggesting that the loss of confidence in political leadership and institutions is associated with healthcare-related policies at the time of the epidemic. In line with this argument, our results are mostly driven by individuals who experienced epidemics under weak governments with less capacity to act against the epidemic, disappointing their citizens. We provide evidence of this mechanism by showing that weak governments took longer to introduce policy interventions in response to the COVID-19 outbreak. These results imply that the Coronavirus may leave behind a long-lasting political scar on the current young generation (“Generation Z”).
  • Andrieș, Alin Marius; Podpiera, Anca Maria; Sprincean, Nicu (2020)
    BOFIT Discussion Papers 13/2020
    We investigate the relationship of central bank independence and banks’ systemic risk measures. Our results support the case for central bank independence, revealing that central bank independence has a robust, negative, and significant impact on the contribution and exposure of a bank to systemic risk. Moreover, the impact of central bank independence is similar for the stand-alone risk of individual banks. Secondarily, we study how the central bank independence affects the impact of selected country and banking system indicators on these systemic measures. The results show that central bank independence may exacerbate the effect of a crisis on the contribution of banks to systemic risk. However, central bank independence seems to mitigate the harmful effect of a bank’s high market power on its systemic risk contribution.
  • Funke, Michael; Tsang, Andrew (2020)
    BOFIT Discussion Papers 12/2020
    The People’s Bank of China (PBoC) has taken numerous measures to cushion the impacts of the COVID-19 health crisis on the Chinese economy. As the current monetary policy framework features a multi-instrument mix of liquidity tools and pricing signals, we employ a dynamic-factor modeling approach to derive an indicator of China’s monetary policy stance. Our approach assumes that comovements of several monetary policy instruments share a common element that can be captured by an underlying unobserved component. We use the derived indicator to trace the response of the PBoC to the coronavirus pandemic. The estimates reveal that the PBoC has implement novel policy measures to ensure that commercial banks maintain liquidity access and credit provision during the COVID-19 crisis.