Assessing the impact of pandemic measures on economic growth in a globalizing world: a non-linear panel analysis

Almost three years after the pandemic started, the world had a strong 3.6% recovery after the recession (IMF, 2021). But, this rebound remains uneven across countries. At the same time, many emerging economies kept dealing with Covid-19, and in some advanced countries, the number of Covid cases is starting to rise again. This paper empirically investigates how the government’s responses to the pandemic affected economic growth in 105 developing and developed countries from 2017 to 2021. Based on panel smooth transition regressions (PSTR) by Gonzalez et al. (2017), the results indicate that the overall effect of public pandemic measures on growth is negative. However, the effects vary depending on how developed a country is and how good its institutions are. Lockdown measures have hurt emerging economies more than advanced economies. Also, high standards of institutional indicators, including how well the government operates and how good the regulations are, reveal that stringency measures have a smaller negative effect on growth, whatever the country’s level of development. Upper-middle income and advanced economies are less affected by pandemic under stable political conditions. Therefore, policymakers should consider providing a responsible institutional environment so that effective steps can be taken to contain efficiently epidemics.