Pandemic Lock-down: The Role of Government Commitment
21 July 2020
14:00 - 15:00 Webinar streamed via zoom

As part of the Joint webinar series organised by the Department of International Economics and the CEPR, we are pleased to invite you to an online public talk by Professor Pierre Yared, Columbia Business School. He will present his paper

Coauthored with Christian A. Moser

 

This note studies optimal lockdown policy in a model in which the government can limit a pandemic’s impact via a lockdown at the cost of lower economic output. A government would like to commit to limit the extent of future lockdown in order to support more optimistic investor expectations in the present. However, such a commitment is not credible since investment decisions are sunk when the government makes the lockdown decision in the future. The commitment problem is more severe if lockdown is sufficiently effective at limiting disease spread or if the size of the susceptible population is sufficiently large. Credible rules that limit a government’s ability to lock down the economy in the future can improve the efficiency of lockdown policy.

 

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