Should I have closed? A multiplex network approach for the short-term economic effect of Covid-19 containment measures in the EU

Abstract

The Covid-19 pandemic has presented governments with unprecedented challenges, forcing them to make crucial decisions: while some countries – as Italy and Spain – identified closures and limitations to mobility as effective containment measures, other countries – as Sweden and The Netherlands – relied mainly on recommendations to citizens. This study aims to investigate the impact of the different containment measures adopted by European Union (EU) countries during the initial wave of the pandemic on country-based economic and financial indicators using a multiplex network approach. The primary focus is to determine if the severity of restrictions led to diverse outcomes for these indicators in the short term. The findings reveal that the main economic indicators, including gross domestic product, imports, exports, non-performing loans, and gross external debt, exhibited similar patterns of evolution across all analyzed countries, regardless of the specific measures implemented. This suggests that the degree of severity in restrictions had limited influence on the economic contraction experienced. Therefore, when the majority of the countries implements more or less severe measures, the propagation of the effects within and between the countries lead to an overall similar behavior for the entire EU. Conversely, as financial indicators are concerned, we show that government bonds and financial indices strongly reacted to the severity of the containment measures chosen by each country.