The Long Economic Hangover of Pandemics

Author:Òscar Jordà, Sanjay R. Singh, and Alan M. Taylor
Position:ÒSCAR JORDÀ is senior policy advisor at the Federal Reserve Bank of San Francisco and professor of economics at the University of California, Davis. SANJAY R. SINGH is an assistant professor of economics at the University of California, Davis. ALAN M. TAYLOR is a professor of economics and finance at the University of California, Davis.
he ong conomic
angover of
History shows COVID-19’s economic fallout
may be with us for decades
Òscar Jordà, Sanjay R. Singh, and Alan M. Taylor
he COVID-19 pandemic’s toll on
economic activity in recent months
is only the beginning of t he story.
While the rapid and unprecedented
collapse of production, trade, and employment may
be reversed as the pandemic eases, historical d ata
suggest that long-term econom ic conseque nces
could persist for a generation or more.
Among these are a prolonged period of depressed
real interest rates— akin to secu lar stagnation—
that may linger for two dec ades or more. Still, one
piece of good news is that these su stained periods of
low borrowing costs are as sociated with higher real
wages and create ample room for governments to
nance stimulus mea sures to counteract economic
damage caused by the pandemic.
Research on the economic fa llout of the ongoing
COVID-19 pandemic has so far natura lly focused
on the short-term impacts from mitigation and
containment strategies. However, as governments
engage in large-sc ale counter-pandemic scal
programs, it is important to underst and what the
economic landscape wil l look like in the years
and decades to come. at land scape will shape
monetary and sca l policy in ways that are not yet
fully understood.
A look at previous pandemics, going back to t he
Black Death in the 1300s, c an help ll this gap
by shedding light on their medium- to long-term
economic eects. In extr apolating from historical
trends, though, it’s important to note one crucial
distinction. Past pandemic s such as the Black
Death occurred at times when virtua lly no one
survived to old age. With today’s longer life spans,
perhaps this time may be dierent: COVID-19
mortality appea rs to disproportionately aect the
elderly, who typically no longer participate in the
labor force and tend to save more than the young.
Pandemics and macroeconomics
Historical studies h ave typically focu sed on one
event, in one country or region, and have traced

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