The Great Lockdown: International Risk Sharing Through Trade and Policy Coordination
Author/Editor: Philipp Engler, Nathalie Pouokam, Diego Rodriguez Guzman, Irina Yakadina
Release Date: © November, 2020
ISBN
: 978-1-51356-018-2
Stock #: WPIEA2020242
English
Stock Status: On back-order
Languages and formats available
| English | French | Spanish | Arabic | Russian | Chinese | Portuguese | |
| Paperback | Yes | ||||||
| Yes | |||||||
| ePub | Yes |
Description
Voluntary and government-mandated lockdowns in response to COVID-19 have caused causing drastic reductions in economic activity around the world. We present a parsimonious two-country-SIR model with some degree of substitutability between home and foreign goods, and show that trading partners’ asynchronous entries into the global pandemic induce mutual welfare gains from trade. Those gains are realized through exchange rate adjustments that cause a temporary reallocation of production towards the economy with the lowest infection rate at any point in time. We show that international cooperation over containment policies that aim at optimizing global welfare further enhances the ability of countries to exploit trade opportunities to contain the spread of the pandemic. We characterize the Nash game of strategic choices of containment policies as a prisoners’ dilemma.
More publications in this series: Working Papers
More publications by: Philipp Engler ; Nathalie Pouokam ; Diego Rodriguez Guzman ; Irina Yakadina
