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COVID-Economics Links (April 6)


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What Happens When You Drink Enough Water

Tridona Bestsellers If you’re reading this: Drink a glass of water. You likely need it, as 75 percent of Americans are described as “chronically dehydrated.” While achieving a state of hydration might seem enviable and impossible, fret not because it’s doable. And the health benefits are not only encouraging, but they are also downright inspiring in the immediate short term, but especially in the long run. “Long-term hydration is the single best thing we can do to prevent chronic illness,” says Dr. Dana Cohen, an integrative medicine specialist in New York and coauthor of Quench: Beat Fatigue, Drop Weight, and Heal Your Body Through the New Science of Optimum Hydration . Though the eight-cup rule is popular, there is no one-size-fits-all number. Instead, it’s more of an individual approach. The new general rule of thumb is half your weight in ounces, according to Dr. Cohen. For example, if you weigh 120 pounds, you need to drink 60 ounces of water a day.
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The permanent scars of fiscal consolidation

The effect that fiscal consolidation has on GDP growth has probably generated more controversy than any other economic debate since the start of the 2008 crisis. How large are fiscal multipliers? Can fiscal contractions be expansionary? Last year, Olivier Blanchard and Daniel Leigh at the IMF produced a paper that claimed that the IMF and other international organizations had underestimated the size of fiscal policy multipliers . The paper argued that the assumed multiplier of about 0.5 was too low and that the right number was about 1.5 (the way you think about this number is the $ impact on GDP of a $1 fiscal policy contraction). While that number is already large, it is possible that the true costs of fiscal consolidations are much larger. In a recent research project (draft coming soon) I have been looking at the effects that fiscal consolidations have on potential GDP. Why is this an interesting topic? Because it happens to be that during the last 5 years we have been seriously re...
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The permanent scars of economic pessimism

Gavyn Davies at the Financial Times reflects on the growing pessimism of Central Banks regarding the growth potential of advanced economies. In the US, the Euro area or the UK, central banks are reducing their estimates of the output gap. They now think about some of the recent output losses as permanent as opposed to cyclical. It output is not far from what we consider to be potential, there is less need for central banks to act and it is more likely that we will see an earlier normalization of monetary policy towards a neutral stance. Why did they change their mind? Is this evidence consistent with the standard economic models that we use to think about cyclical developments? Measuring potential output or the slack in the economy has always been challenging. One can rely on models that capture the factors that drive potential output (such as the capital stock or productivity or demographics) or one can look at more specific indicators of idle capacity, such as capacity utilization or...
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