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A Note on Hibernation in a Lockdown

Author

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  • Federico Sturzenegger

    (Universidad de San Andres)

Abstract

Discussion on the optimal fiscal response to lockdowns is just starting. In this note, we make a simple yet apparently ignored point. If a lockdown entails a reduction in the desire for consumption the optimal response is to reduce consumption, a response that I call "hibernation". In this case, attempts to smooth the effect of the lockdown, which has been the almost universal recommendation to deal with Covid-19, leads to welfare losses.

Suggested Citation

  • Federico Sturzenegger, 2020. "A Note on Hibernation in a Lockdown," Working Papers 137, Universidad de San Andres, Departamento de Economia, revised Apr 2020.
    • Handle: RePEc:sad:wpaper:137
    as

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    File URL: https://webacademicos.udesa.edu.ar/pub/econ/doc137.pdf
    File Function: First version, April 2020
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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.
    2. Veronica Guerrieri & Guido Lorenzoni & Ludwig Straub & Iván Werning, 2022. "Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?," American Economic Review, American Economic Association, vol. 112(5), pages 1437-1474, May.
    3. Faria-e-Castro, Miguel, 2021. "Fiscal policy during a pandemic," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    4. Warwick McKibbin & Roshen Fernando, 2021. "The Global Macroeconomic Impacts of COVID-19: Seven Scenarios," Asian Economic Papers, MIT Press, vol. 20(2), pages 1-30, Summer.
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    Cited by:

    1. Ricardo Hausmann & Ulrich Schetter, 2020. "Horrible Trade-offs in a Pandemic: Lockdowns, Transfers, Fiscal Space, and Compliance," CID Working Papers 382, Center for International Development at Harvard University.

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    More about this item

    Keywords

    fiscal policy; consumption;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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