Gita Gopinath on managing the economic fallout from coronavirus

Quite clear now in countries with sensible/compassionate governments what the public health response needs to be. ‘Flatten the curve’ is now a simple and effective mitigation measure. The economic impacts are only beginning to show, as the coronavirus impacts global supply chains, the inevitable demand and supply-side shocks start to show. Governments have to adopt a set of far-sighted and bold economic policy measures to limit the slowdown.

Here is what Gita Gopinath, Chief Economist of the International Monetary Fund has to say. Read in full:

Households and businesses hit by supply disruptions and a drop in demand could be targeted to receive cash transfers, wage subsidies, and tax relief, helping people to meet their needs and businesses to stay afloat.

For those laid off, unemployment insurance could be temporarily enhanced, by extending its duration, increasing benefits, or relaxing eligibility. Where paid sick and family leave is not among standard benefits, governments should consider funding it to allow unwell workers or their caregivers to stay home without fear of losing their jobs during the epidemic.

Central banks should be ready to provide ample liquidity to banks and nonbank finance companies, particularly to those lending to small- and medium-sized enterprises, which may be less prepared to withstand a sharp disruption. 

Broader monetary stimulus such as policy rate cuts or asset purchases can lift confidence and support financial markets…

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