Global Economic and Financial Effects of 21st Century Pandemics and Epidemics

23 Pages Posted: 15 Apr 2020

See all articles by Chang Ma

Chang Ma

Fudan University - Fanhai International School of Finance (FISF)

John H. Rogers

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section

Sili Zhou

Fanhai International School of Finance and School of Economics, Fudan University

Date Written: March 30, 2020

Abstract

We provide perspective on the possible global economic and financial effects from COVID-19 by examining the handful of similar major health crises in the 21st century. We estimate the effects of these disease shock episodes on GDP growth, fiscal policy, expectations, financial markets, and corporate activity. Simple time-series models of GDP growth indicate that real GDP is 2.57 % lower on average across 210 countries in the year of the official declaration of the outbreak and is still 2.96 % below its pre-shock level five years later. The negative effect on GDP is felt less in countries with more aggressive first-year responses in government spending. Consensus forecast data suggests a pessimistic view on real GDP initially that lasts for two months, an effect that is larger for emerging market economies. Stock market responses indicate an immediate negative reaction. Finally, using firm-level data, we find a fall in corporate profitability and employment, and an increase in debt, the last of which is further reflected in higher sovereign CDS spreads.

Keywords: Health crises, Output loss, Fiscal policy, Financial volatility

Suggested Citation

Ma, Chang and Rogers, John H. and Zhou, Sili, Global Economic and Financial Effects of 21st Century Pandemics and Epidemics (March 30, 2020). Available at SSRN: https://ssrn.com/abstract=3565646 or http://dx.doi.org/10.2139/ssrn.3565646

Chang Ma (Contact Author)

Fudan University - Fanhai International School of Finance (FISF) ( email )

China

John H. Rogers

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2873 (Phone)
202-736-5638 (Fax)

Sili Zhou

Fanhai International School of Finance and School of Economics, Fudan University ( email )

Room 520, Building 5, 220 Handan Road
Shanghai
China

HOME PAGE: http://siliz.weebly.com/

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