Macroeconomic Risks Across the Globe Due to the Spanish Flu

31 Pages Posted: 11 Sep 2020

See all articles by Roberto A. De Santis

Roberto A. De Santis

European Central Bank (ECB) - Directorate General Economics

Wouter Van der Veken

Ghent University - Department of Economics

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Date Written: September, 2020

Abstract

We characterise the distribution of expected GDP growth during the Great Influenza Pandemic (known also as Spanish Flu) using a non-linear method in a country panel setting. We show that there are non-negligible risks of large GDP losses with the 5% left tail of the distribution suggesting a drop in the typical country's real per capita GDP equal to 29.1% in 1918, 10.9% in 1919 and 3.6% in 1920. Moreover, the fall in per capita GDP after the Spanish FLu was on average particularly large in low-income countries. Particularly, the size of the GDP drop in the lower tail of the distributions is high for higher income countries and immense for lower income countries. As for the United States, the estimated size of the recession in the lower tail of the distribution following the Spanish Flu is not negligible.

Keywords: macroeconomic risks, non-linear models, pandemic disease, Spanish Flu

JEL Classification: E3, I0

Suggested Citation

De Santis, Roberto A. and Van der Veken, Wouter, Macroeconomic Risks Across the Globe Due to the Spanish Flu (September, 2020). ECB Working Paper No. 20202466, Available at SSRN: https://ssrn.com/abstract=3690912

Roberto A. De Santis (Contact Author)

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Wouter Van der Veken

Ghent University - Department of Economics ( email )

Belgium

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