The supply side matters: Guns versus butter, COVID-style

a column by Richard Baldwin (The Graduate Institute, Geneva) for VOX: CEPR’s Policy Portal

“Go big. Act fast. Keep the lights on” is good advice for governments trying to flatten the epidemiological and recession curves simultaneously.

This column argues that the combination of containment policies that dampen production and stimulus policies that maintain spending will generate supply-side problems. Cost-push inflation may return, political pressures for price controls and rationing may be irresistible, and governments may find themselves engaged in thinking about production and logistics of the type not undertaken since the 1940s.

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Labels:
Covid-19, global_economy, health_economics, productivity_and_innovation,

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