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On Monday, July 6, 2020, Michael Spence joined the Princeton Bendheim Center for Finance for a webinar to discuss new data from a Luohan Academy study that tracks the economic recovery from COVID-19 across several countries. Spence is a Professor of Economics at NYU’s Stern School of Business and a 2001 recipient of the Nobel Prize in Economics.

Watch the full presentation below and download the slides here.  You can also watch all Markus’ Academy webinars on the Markus’ Academy YouTube channel.

Executive Summary

To respond effectively to the crisis, we need real-time data. Conventional macroeconomic data are out-of-date given the speed of developments. In his presentation, Spence reports on findings from a Luohan Academy study tracking real-time data in about 132 countries. Watch at minute 17:35 on YouTube.

Digital tools can help prevent spread of the virus, but there are real privacy concerns. In most OECD countries, we made relatively little use of digital tracking tools because we decided we can’t solve privacy concerns in real-time. This might have been the right choice, but these countries will pay a price by not being able to track cases as well and as quickly. Watch at minute 22:30 on YouTube.

Real-time data can demonstrate economic and health trade-offs of policy responses. The Luohan Academy measured economic activity (y-axis) versus health status (doubling time of confirmed COVID cases on x-axis). Watch at minute 37:20 on YouTube.

Some observations from their data

  • China suffered a major contraction, but recovered relatively quickly both economically and health-wise through fast and strict intervention. South Korea, Taiwan and Hong Kong did significantly better than Mainland China. See chart.
  • Economic contractions in the U.S. and the U.K. were less severe than in New Zealand, but recovery has been slower and falls behind both economically and health-wise. See chart.
  • In Europe, Italy, Austria, and Norway all saw big contractions but also steady recovery. It’s too early to know what will happen in Sweden. See chart.
  • In Brazil, the economy hasn’t contracted as much economically but the virus isn’t under control.
  • In Africa, we see dangerous numbers in Nigeria, South Africa, and Rwanda where countries are backtracking on confirmed cases. See chart.
  • In the U.S., several states including Arizona, Florida, Oklahoma, and Texas are seeing negative health effects of re-opening too soon. See charts here and here.
  • In Southeast Asia, the economic contraction has been worse in India and the Philippines than in Vietnam, and Vietnam has had a better recovery both economically and health-wise. See chart.

In interpreting these graphs, Spence notes while there will always be trade-offs, the following seems to hold more generally: A timely, early response is better than a later one. Movement upward and to the right is better, provided you don’t backtrack.

Data from YouGov suggests some country’s governments gained significant trust during the crisis, while others lost it. Trust increased in Australia, but declined in the U.K. Canada sustained pretty high levels of trust. Trust in government was low in the U.S. and Mexico before the crisis and has remained low. Trust in Italy and Germany is pretty high and higher than in Spain and France.