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COVID-19 Vaccination and Financial Frictions

Author

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  • Cristina Arellano
  • Yan Bai
  • Gabriel Mihalache

Abstract

We study the COVID-19 epidemic in emerging markets that face financial frictions and its mitigation through social distancing and vaccination. We find that restricted vaccine availability in emerging markets, as captured by limited quantities and high prices, renders the pandemic exceptionally costly compared to economies without financial frictions. Improved access to financial markets enables better response to the delay in vaccine supplies, as it supports more stringent social distancing measures prior to wider vaccine availability. We show that financial assistance programs to such financially constrained countries can increase vaccinations and lower fatalities, at no present-value cost to the international community.

Suggested Citation

  • Cristina Arellano & Yan Bai & Gabriel Mihalache, 2021. "COVID-19 Vaccination and Financial Frictions," Staff Report 632, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:93491
    DOI: 10.21034/sr.632
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    References listed on IDEAS

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    1. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
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    More about this item

    Keywords

    Fiscal space; Vaccination; Financial market conditions; COVID-19;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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