Countercyclical economic policy response during COVID-19

Abstract

This paper introduces an extensive database of governments’ economic policy measures adopted in response to the COVID-19 pandemic and examines the outcomes of these measures. Using this novel dataset, five key observations are documented: (1) Countries expected by the IMF at the onset of the pandemic to experience sharper GDP declines in 2020 adopted larger fiscal and macro-financial packages by year-end. (2) Wealthier nations implemented larger fiscal and macro-financial policy packages, even as a percentage of GDP. (3) High pre-pandemic inflation countries adopted less expansionary monetary policies. (4) Adoption of larger fiscal packages correlated with higher GDP growth rates in 2020 and 2021. (5) Countries with more expansionary policies during the pandemic did not necessarily experience higher inflation rates in 2021 or 2022.