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In response to COVID-19, countries frequently adopted multiple types of policies to address the economic and financial effects of the pandemic. This paper analyzes the impact on bank lending of combinations or packages of policies (fiscal, monetary, and prudential) adopted across a broad sample of countries. Using a comprehensive policy announcement level dataset together with bank level information, we find that lending grew faster at banks in countries which announced large packages combining fiscal, monetary, and prudential measures (“All-out” packages), especially when uncertainty was high. Both the scope and size of policy packages were important: packages combining all three types of policies, but where only some were large, were relatively less effective in enhancing credit. The impact was stronger among more constrained banks with low equity levels. “All-out” packages also increased liquidity for bank dependent firms but did not disproportionately benefit unviable firms.
We study online spending shares in 44 economies and 26 industries during the COVID-19 pandemic, using online transaction data from Mastercard. The online shares of total credit card transactions surged during the pandemic during lockdowns, but since returned to pre-pandemic trends in most countries. The differences between countries are strongly correlated with the mobility and fiscal measures. There is little evidence of permanent structural changes in ecommerce spending patterns. Finally, we estimate that COVID-19-related restrictions on in-person spending imposed average welfare costs of 7 percent across countries.
We study a bank run in India in which private bank branches experience sudden and considerable loss of deposits, which migrate to state-owned public sector banks (PSBs) that serve as safe havens. We trace the consequences of the deposit reallocation using bank branch-level balance sheet and firm-bank lending data. The flight to safety is not a flight to quality. Lending shrinks and credit quality improves in run banks, but worsens in PSBs receiving the flight-to-safety flows. The reallocation of resources is not efficient in the aggregate.
This paper exploits the unanticipated sequestration of federal budget accounts in March 2013 to examine how contractors adjusted lobbying activities in response to the sequester. The sequestration reduced the funds disbursed through procurement. Firms with limited exposure to the cuts reduced lobbying spending after the event, whereas firms with high exposure maintained, or even increased, lobbying expenses. More affected firms appear to have intensified lobbying efforts to distinguish themselves, and to improve their chances of procuring a larger share of the reduced pie. These effects are stronger for government-dependent sectors and sectors where competition is more intense.
High public debt is urging policy makers to consider strategies to rebuild buffers and preserve debt sustainability. We focus on discretionary fiscal consolidation, defined as an increase in the ratio of primary balance (the difference between government revenues and non-interest expenditures) to GDP not driven by business cycle considerations, and evaluate whether—and under which conditions—it is likely to be associated with a durable reduction in public debt to GDP ratios. Our findings, based on a large sample of advanced and emerging countries, indicate that, on average, discretionary fiscal consolidation has a minimal impact on debt ratios. However, discretionary consolidations implemented during economic upturns or in scenarios where they can “crowd in” private investment, are more likely to be associated with sustained reductions in debt ratios.
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