Economic consequences of COVID-19 pandemic

What is it about?

The new COVID-19 pandemic has spread to almost every nation in the world. Most of the available literature on the economic effects of COVID-19 focuses mainly on the recessionary effects of COVID-19 on different industries and aggregate economies. However, some industries, such as masks (surgical and N95, etc.), ventilators and miscellaneous medical services, benefit economically from the current COVID-19 disaster. More and more resources have been diverted to these industries due to the increased demand of these special industries. Excessive demand from these special industries will eventually return to normal or, under special conditions, fall below their normal (usual) demand once the pandemic has ended. Which, in turn, will not only affect these special industries, but can also have an impact on the recovery of aggregate economies around the globe. The study presents a comprehensive model for the different phases of the short-term life- cycle of these special industries.

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Photo by CDC on Unsplash

Photo by CDC on Unsplash

Why is it important?

First of all, this study clearly defines the theory behind the birth and the death of short-term Disaster Blessed Industries (DBIs). Secondly, there is no such theory or study which presents the life-cycle of short-term DBIs. It is important to understand the short- run DBIs because most of the policymakers via different fiscal or monetary options only look at the possibilities of moving the economies out of recession during the phase of natural disasters like the current COVID-19 pandemic etc. However, once the short-run economies move back to their normal positions, there is a risk that the extra labor and long term investment made in the DBIs due to hyped demand during the period of specific short run fears will not be sustainable any more. And the labor can be laid off and the extra fixed resources (machinery etc.) will be idle i.e. became of no use. This can lead to these important industries like the masks or the ventilator industries suffer unstainable losses and can lead to their permanent shutdown. Which can force the recently recovered economy to move back to a much severe recession or depression than it actually faced in the period of the short- run fear events like the current COVID-19 pandemic.

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