Real-time tracking of COVID-19 impacts across Europe reveals that seeking ''herd immunity'' provides no economic benefits

This paper develops a methodology for tracking in real time the impact of the COVID-19 pandemic on economic activity by analyzing high-frequency electricity market data. The approach is validated by several robustness tests and by contrasting our estimates with the official statistics on the recession caused by COVID-19 in different European countries during the first two quarters of 2020. Compared with the standard indicators, our results are much more chronologically disaggregated and up-to-date and, therefore, can inform the current debate on the appropriate policy response to the pandemic. Unsurprisingly, we find that nations that experienced the most severe initial outbreaks also grappled with the hardest economic recessions. However, we detect diffused signs of recovery, with economic activity in most European countries returning to its pre- pandemic level by August 2020. Furthermore, we show how delaying intervention or pursuing “herd immunity†are not successful strategies, since they increase both economic disruption and mortality. The most effective short-run strategy to minimize the impact of the pandemic appears to be the introduction of early and relatively less stringent non-pharmaceutical interventions.