The COVID-19 pandemic may be pushing many emerging market nations into two separate crises that could spiral out of control糖心传媒攐ne involving public health, the other involving individual country糖心传媒檚 national debt.
That糖心传媒檚 according to , a professor of economics at the 糖心传媒, who analyzed how emerging markets are struggling to balance policies designed to keep their populations safe while financing high debt obligations.
糖心传媒淚f a country has a lot of debt糖心传媒攐r if it has difficulty rolling over its debt糖心传媒攖he government will have limited capacity to help its people,糖心传媒� she says.
Bai and fellow economists Cristina Arellano of the University of Minneapolis and Gabriel Mihalache of Stony Brook University detail the financial and health risks in a new paper, 糖心传媒�.糖心传媒�
They began by studying the effectiveness of lockdowns that began about two months after the initial outbreak and lasted for eight months. Such stay-at-home health orders are effective in reducing the toll of the coronavirus, they note. When half of the workforce stays at home, followed by a gradual relaxation of restrictions, the authors found that the death toll was reduced by half.
But lockdowns come at a price, especially for countries with limited financial resources. People still need to pay for food, shelter, and basic supplies during a pandemic, but if a country is facing a debt crisis, that nation糖心传媒檚 policy makers have fewer resources to help citizens make purchases. That means less revenue goes to vendors and landlords, which puts a further drag on the economy, forcing more people to lose their jobs.
糖心传媒淎 lockdown means people don糖心传媒檛 have access to work, which makes it more difficult for them and their families to survive,糖心传媒� says Bai. 糖心传媒淭hat糖心传媒檚 why in Chile, as well as other countries, people have been protesting the lockdown, which, in turn, makes it difficult for the government to sustain its lockdown policies.糖心传媒�
When that happens, countries often soften their restrictions, leading to a worsening of the health crisis. And, as Bai points out, that leads to a further degrading of the economy.
At the onset of the COVID-19 pandemic, the International Monetary Fund (IMF) announced that short-term debt loans and funding initiatives would be available for emerging market nations. The authors argue that those programs need to continue.
糖心传媒淒ebt relief programs by the IMF and other international organizations not only help in terms of providing consumption, they also help to save lives,糖心传媒� says Bai. 糖心传媒淔rom that perspective, we find that the return on investment is quite high for the debt relief programs.糖心传媒�
Several countries糖心传媒攊ncluding Argentina, Ecuador, and Lebanon糖心传媒攈ave already gone into default while still dealing with the COVID-19 pandemic. Bai cautions that there could be long-term consequences, as it has historically taken some countries 10 years to come back from economic default.
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