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COVID-19, lockdown and two-sided uncertainty

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  • Benjamin Davies
  • Arthur Grimes

Abstract

When COVID-19 struck, the New Zealand government had two choices: enter lockdown immediately or delay its decision. Delay would have enabled more information to emerge about health and economic dynamics, while preserving the option to act at a later date. However, delay may have destroyed the option to eradicate COVID-19. We model the government’s decision when faced with the uncertainty around health and economic dynamics generated by COVID-19. Our model captures both two-sided uncertainty and the dynamic consequences that flow from the government’s initial decision. Our analysis will help guide future policy decisions amid similarly complex uncertainties.

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  • Benjamin Davies & Arthur Grimes, 2022. "COVID-19, lockdown and two-sided uncertainty," New Zealand Economic Papers, Taylor & Francis Journals, vol. 56(1), pages 49-54, January.
    • Handle: RePEc:taf:nzecpp:v:56:y:2022:i:1:p:49-54
    DOI: 10.1080/00779954.2020.1806340
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    Cited by:

    1. de Mello-Sampayo, F.;, 2024. "Uncertainty in Healthcare Policy Decisions: An Epidemiological Real Options Approach to COVID-19 Lockdown Exits," Health, Econometrics and Data Group (HEDG) Working Papers 24/01, HEDG, c/o Department of Economics, University of York.

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