COVID-19, Lockdowns, and States’ Cost of Borrowing
| Autor: | Cihan Uzmanoglu, Tran N |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
History
Polymers and Plastics Coronavirus disease 2019 (COVID-19) Poverty media_common.quotation_subject social sciences Monetary economics Industrial and Manufacturing Engineering Market liquidity State (polity) Infectious disease (medical specialty) Economic recovery Pandemic Business Business and International Management media_common |
| Zdroj: | SSRN Electronic Journal. |
| ISSN: | 1556-5068 |
| DOI: | 10.2139/ssrn.3734900 |
| Popis: | We study the influence of state lockdowns during the coronavirus (COVID) pandemic on states’ cost of borrowing. As COVID is an infectious disease, we first examine the extent to which states’ own COVID exposures are priced, controlling for US-level COVID developments. We find that a doubling of new COVID cases in a state is associated with a 5% increase in its cost of borrowing. Although this finding suggests that lockdowns may lower states’ borrowing costs by reducing the spread of COVID, lockdowns also reduce local economic activities. Overall, we find that lockdown announcements are associated with an 8% increase in states’ cost of borrowing. This effect is stronger among states with greater poverty rates and for lockdowns announced before the Federal Reserve’s liquidity programs, and not reversed after state re-openings. Our findings suggest that the increase in financing costs of lock-down states may prolong their economic recovery from the pandemic. |
| Databáze: | OpenAIRE |
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