The vast uncertainty surrounding the possible spread of COVID-19 and the duration of the near-economic standstill required to combat it make forecasting little different from guessing. Clearly, this is a “whatever-it-takes” moment for large-scale, outside-the-box fiscal and monetary policies.

CAMBRIDGE – While pandemics are comparatively rare, and severe ones rarer still, I am not aware of a historical episode that can provide any insight as to the likely economic consequences of the unfolding global coronavirus crisis. This time truly is different.

    A key feature of this episode that makes it unique is the policy response. Governments around the world are giving priority to measures that limit the spread of disease and save lives, including the complete lockdown of a region (as in China) and even of entire countries (Italy, Spain, and France, for example). A much longer list of countries, including the United States, have imposed strict international travel bans and prohibited all manner of public events.

    These measures could not be further from the policy response to the deadliest viral outbreak of modern times, the 1918-19 Spanish influenza pandemic (see chart). That pandemic, which claimed 675,000 lives in the US and at least 50 million worldwide, occurred against the backdrop of World War I. This fact alone precludes drawing any meaningful comparisons regarding the effects of the COVID-19 pandemic per se on the US or global economy.


    In 1918, the year in which influenza deaths peaked in the US, business failures were at less than half their pre-war level, and they were lower still in 1919 (see chart). Driven by the wartime production effort, US real GDP rose by 9% in 1918, and by around 1% the following year even as the flu raged.

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