We continue to sift through the academic literature on COVID for insights into the policy response. This week we delve into a new CEPR paper which provides a useful framework for lifting working from home restrictions. The authors model the case for Germany but the approach can be easily extended worldwide.
We also feature previews on the Fed (today) and ECB (tomorrow). Intra-meeting stimulus from both central banks means this week’s scheduled policy meetings are likely to be more of an opportunity for reflection, rather than opportunity for new policy announcements. US rates guru George Goncalves details what the Fed has done since the last meeting and his big picture thoughts on Fed policy. Caroline Grady recaps ECB’s latest measures on asset purchases and collateral requirements, and the importance of committing to do more, if needed. We also have our daily updated COVID tracker.
Enjoy!
Bilal
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(total reading time: 3 mins)
We continue to sift through the academic literature on COVID for insights into the policy response. This week we delve into a new CEPR paper which provides a useful framework for lifting working from home restrictions. The authors model the case for Germany but the approach can be easily extended worldwide.
We also feature previews on the Fed (today) and ECB (tomorrow). Intra-meeting stimulus from both central banks means this week’s scheduled policy meetings are likely to be more of an opportunity for reflection, rather than opportunity for new policy announcements. US rates guru George Goncalves details what the Fed has done since the last meeting and his big picture thoughts on Fed policy. Caroline Grady recaps ECB’s latest measures on asset purchases and collateral requirements, and the importance of committing to do more, if needed. We also have our daily updated COVID tracker.
Enjoy!
Bilal
A Framework To Ease Working from Home (4 min read) Governments worldwide are facing tough decisions on how to ease lockdown restrictions. Given the trade-off between the spread of the virus and the economic cost, the overall success of the COVID response will be determined as much by the reopening phase as it was by the initial response.
A new paper from the CEPR provides a framework for easing restrictions on working from home and uses data from Germany to estimate the optimal approach in output per worker. But the takeaways apply globally: firstly, the need to lift restrictions initially only for those who cannot work from home so as to keep infection rates low; secondly, undertaking a phased easing of restrictions by region that balances output losses per worker with the risk of rising infection rates. Systemic industries or those with very high value added should also be prioritised.
These findings will be useful for policymakers around the world as they search for the optimal way to reopen economies.
(Caroline Grady │ 29th April, 2020)
Fed Preview: Break On Through To The NIRP Side With A Super-sized B/S? (8 min read) The Federal Reserve has made one of the most dramatic displays in central bank activity in history, skipping the scheduled March meeting due to emergency meetings in between and launching a plethora of new credit easing programs in the interim. After all that, it’s hard to believe the Fed has reserved any major new policy prescriptions for the upcoming April FOMC meeting.
We may see the groundwork for Yield Curve Control (YCC) – not negative interest rate policy (NIRP) – and tweaks to normal QE. However, I bet the folks at the Fed want to use this opportunity to reflect on recent policy actions and how their programs are evolving…
(George Goncalves │ 29th April, 2020)
ECB Preview – Committing To Do More (3 min read) The ECB’s governing council has significantly stepped up its crisis response since the last scheduled policy meeting six weeks ago. It’s delivered large-scale stimulus through a new asset purchase programme and loosened collateral rules for accessing liquidity support, all the while greatly improving communication around doing whatever is needed. But the unprecedented scale of the current crisis leaves scope for expanding stimulus further. Christine Lagarde does not need to deliver it at Thursday’s policy meeting, but she must convince markets that the ECB stands ready to do more if needed…
(Caroline Grady │ 29th April, 2020)
Global COVID-19 Tracker In the DM world, Sweden experienced a 4% increase in cases, while UK and Canada are just behind at 3%. Other increases can be found in US, France, and Denmark, with 2% each. For deaths, the rates are slightly bigger, with Australia leading at 6%. It is followed by Canada and Ireland at 5%, with US, Austria, and Sweden coming next at 4%…
(Bilal Hafeez, Stefan Posea│ 29th April, 2020)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)