COVID-19 Outbreak, Social Response, and Early Economic Effects: A Global VAR Analysis of Cross-Country Interdependencies

37 Pages Posted: 28 Aug 2020

See all articles by Fabio Milani

Fabio Milani

University of California, Irvine - Department of Economics

Date Written: 2020

Abstract

This paper studies the social and economic responses to the COVID-19 pandemic in a large sample of countries. I stress, in particular, the importance of countries' interconnections to un-derstand the spread of the virus. I estimate a Global VAR model and exploit a dataset on existing social connections across country borders. I show that social networks help explain not only the spread of the disease, but also cross-country spillovers in perceptions about coronavirus risk and in social distancing behavior. In the early phases of the pandemic, perceptions of coronavirus risk in most countries are affected by pandemic shocks originating in Italy. Later, the U.S., Spain, and the U.K. play sizable roles. Social distancing responses to domestic and global health shocks are heterogeneous; however, they almost always exhibit delays and sluggish adjustments. Unemployment responses vary widely across countries. Unemployment is particularly responsive to health shocks in the U.S. and Spain, while unemployment fluctuations are attenuated almost everywhere else.

Keywords: COVID-19 pandemic, health shocks, global VAR, social networks, social distancing, cross-country spillovers, unemployment indicators, Google trends

JEL Classification: C320, F690, I120, I180, L860, Z130

Suggested Citation

Milani, Fabio, COVID-19 Outbreak, Social Response, and Early Economic Effects: A Global VAR Analysis of Cross-Country Interdependencies (2020). Available at SSRN: https://ssrn.com/abstract=3682018 or http://dx.doi.org/10.2139/ssrn.3682018

Fabio Milani (Contact Author)

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

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