Government policy interventions during COVID-19 pandemic and economic performance

Abstract

This paper examines the impacts of government policy interventions during COVID-19 pandemic on economic performance. The study pooled daily data from 108 countries across 5 regions based on World Bank classification from March 22, 2020 to July 31, 2020. These regions are East Asia and Pacific; Europe and Central Asia; Latin America and the Caribbean; Middle East and North Africa as well as sub-Saharan Africa. The study employs Autoregressive Distributed Lagged (ARDL) model. This study uses STATA 15.0 to estimate error correction-based Pooled Mean Group (PMG), Mean Group (MG) and Dynamic Fixed Effect (DFE) model for analyzing dynamic heterogeneous panel data. The empirical result from each region of the World is as follows: (1) Result from PMG on East Asia and Pacific region reveals that government policy of debt/contract relief towards cushioning the effects of COVID-19 pandemic has positive impact on economic performance in the short run while none of the government policy measure is statistically significant in the long run. (2) Result from MG on Europe and Central Asia shows that in both the long run and the short run, number of confirmed cases and school closure policy have negative impacts on economic performance and statistically significant at 1 percent level while in the long run, international travel control and public information campaign have negative and positive impacts on economic performance in the region respectively. Both International travel control and public information campaign are statistically significant at 1 percent and 10 percent levels respectively. (3) Result from PMG on Latin America and the Caribbean shows that the number of confirmed cases and debt/contract relief are statistically significant and have negative and positive impacts on economic performance respectively in the short run. The former is statistically significant at 5 percent level while the latter is statistically significant at 10 percent level. In the long run however, only international travel control imposed by government is significant at 5 percent level and has negative impact on economic performance in the region. (4) Result from PMG on Middle East and North Africa shows that only number of confirmed cases is significant and has positive impact on economic performance at 10 percent level in the short run. No robust impacts is found in the long run. (5) Result from PMG on sub-Saharan African region shows that number of confirmed cases has positive impact, which is statistically significant at 10 percent level on economic performance while in the long run, income support package has negative impact on economic performance at 5 percent level of significance. The study therefore, concludes that, the relative economic potency and effectiveness of government interventionist policy measures towards putting COVID-19 pandemic under control vary across regions of the world. Economically, Europe and Central Asia is the region that is worst hit by the pandemic when compared with other regions.