Social Distancing and the Macrofinancial Consequences of Natural Disasters

23 Pages Posted: 17 Jan 2021

See all articles by Johannes Beutel

Johannes Beutel

Deutsche Bundesbank

Friederike Fourné

Ludwig Maximilian University of Munich (LMU)

Norbert Metiu

Deutsche Bundesbank

Date Written: January 15, 2021

Abstract

We use the COVID-19 pandemic as a natural experiment to estimate the effects of a global disaster shock on economic activity, international trade, and financial markets. To identify the shock, we exploit cross-country variation in the timing and intensity of pandemic-induced social distancing at daily frequency. An unexpected reduction in human mobility relative to pre-pandemic levels leads to significant declines in high-frequency measures of global economic activity, such as daily nitrogen dioxide concentrations and daily maritime trade carried by large cargo ships. Global stock markets decline, and sovereign credit spreads persistently widen after the pandemic disaster shock.

Keywords: COVID-19; economic activity; financial markets; natural disasters; pandemics; social distancing

JEL Classification: E32; E44; F44; Q54

Suggested Citation

Beutel, Johannes and Fourné, Friederike and Metiu, Norbert, Social Distancing and the Macrofinancial Consequences of Natural Disasters (January 15, 2021). Available at SSRN: https://ssrn.com/abstract=3766835 or http://dx.doi.org/10.2139/ssrn.3766835

Johannes Beutel (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Friederike Fourné

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Norbert Metiu

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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