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Measuring institutional response and convergence in the time of COVID-19: unified vs heterogeneous policy response

The COVID-19 pandemic crisis has put enormous pressure on all economic agents, particularly fiscal/monetary authorities and institutions across countries. The purpose of this study is to measure and assert the role of institutional response in fighting the pandemic and avoiding business cycles. Setting up optimal government response to the pandemic requires empirical knowledge on the links between distinct government responses: health and economic policy. The former is designed to address the security of and protection for the population and the latter to prevent global economic fallout. We use data from January 2020 to September 2021 for 47 OECD countries on government response, lockdown and stringency policies, income support, and debt relief response. Data are analysed using panel multinomial logit modelling to predict the chances of avoiding pandemic business cycles resulting from the institutional response. Our study provides empirical knowledge to policymakers and practitioners, enabling them to set up an optimal policy framework in fighting the pandemic. Governments’ optimal response to COVID-19 significantly affects institutional response, which is essential not only during the pandemic but also afterwards.

institutions and institutional response ; OECD ; panel multinomial logit ; COVID-19 pandemic ; business cycles

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