The Economics of Pandemics
Introduction
For more than three years, countries worldwide have been dealing with the COVID-19 crisis. During this time, millions of people have been infected and died because of this global pandemic. Initially, most deaths were concentrated in China and the Western Pacific region. After the quick spread of the virus to other regions, it was then European countries that experienced the highest number of deaths. Italy, France, Germany, Spain and the UK were major cases in point. Thereafter, the Americas region, particularly Brazil and the United States, were hit hard. For instance, the US recorded an infection rate of almost 0.8% relative to its population, and by July 2020, the US accounted for one-fourth of global cases during the Trump administration.
In addition to global health issues, this pandemic has had a more severe impact on economies worldwide compared to other pandemics since 1900, such as the Spanish Flu. In many parts of the world, people have struggled to meet their daily expenses. They have lost their jobs, faced increased risks of infection, been more vulnerable to mental and emotional disorders, and experienced significant socio-economic problems as a result. Also, many businesses have been facing significant reductions in their profits, and some have gone bankrupt.
When the COVID-19 outbreak began in New Zealand, the impact was felt deeply, as people realised that nobody was protected against this virus. After experiencing a series of community cases in March 2020, the then government responded by closing international borders, imposing nationwide lockdowns, and strongly advising people to take preventive measures such as avoiding social gatherings, maintaining physical distancing, practising regular handwashing, wearing face coverings, and using hand sanitising, in order to reduce the transmission rate.
Part II: Macroeconomic Situation
Suppose you are a policy advisor who is asked to analyse the economic impacts of the COVID-19 pandemic on the whole economy. You may start your analysis by conducting background research on the relationship between the occurrence of global pandemics and the economic performance of countries. Drawing on previous cross-country research, you may conclude that since 1900, a recession has been the likely outcome of such pandemics. However, it is worth noting that the occurrence of recessions during those times was not solely related to pandemics. For instance, the Spanish Flu (1918-20) occurred when WWI was about to end, and there was evidence of decreased employment (to population). Similarly, recessions following the Asian Flu (1957-58) and Hong Kong Flu (1968-69) pandemics were caused by federal reserve action and fiscal and monetary policies related to the Vietnam War.
Macroeconomic Questions
4. Considering the historical tendency for pandemics to contribute to recessions, clearly identify and analyse the main factors contributing to the recession in New Zealand after this global pandemic. To support your argument, provide relevant statistics/data comparing New Zealand's macroeconomics before (prior to 2020) and after the pandemic (after 2020 onwards). This data can be related, but not limited to, GDP per capita/growth rate, unemployment rate, inflation rate, government expenditures, etc. Report only statistics that can fully support your argument. Country-level data can be adopted from sources such as NZ stats, the WB, UN, IMF, OECD, etc. Utilise the AD-AS diagram to clearly explain and illustrate changes caused by post-pandemic policies.
5. Expanding on the analysis
