Nicholas Bloom et al
While assessing the economic impact of COVID-19 is essential, it is challenging due to the extreme speed with which the crisis unfolded. This column uses three forward-looking uncertainty measures to quantify the enormous increase in economic uncertainty over the past weeks. Feeding these COVID-induced uncertainty shocks into a model of disaster effects predicts a year-on-year contraction in US real GDP of nearly 11% as of 2020 Q4. About 60% of the forecasted output contraction is estimated to be due to COVID-induced uncertainty.
