Real-Time Estimation of the Short-Run Impact of COVID-19 on Economic Activity Using Electricity Market Data
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Real‑Time Estimation of the Short‑Run Impact of COVID‑19 on Economic Activity Using Electricity Market Data Carlo Fezzi1,2 · Valeria Fanghella1 Accepted: 9 July 2020 © The Author(s) 2020
Abstract In response to the COVID-19 emergency, many countries have introduced a series of social-distancing measures including lockdowns and businesses’ shutdowns, in an attempt to curb the spread of the infection. Accordingly, the pandemic has been generating unprecedented disruption on practically every aspect of society. This paper demonstrates that high-frequency electricity market data can be used to estimate the causal, short-run impacts of COVID-19 on the economy, providing information that is essential for shaping future lockdown policy. Unlike official statistics, which are published with a delay of a few months, our approach permits almost real-time monitoring of the economic impact of the containment policies and the financial stimuli introduced to address the crisis. We illustrate our methodology using daily data for the Italian day-ahead power market. We estimate that the 3 weeks of most severe lockdown reduced the corresponding Italian Gross Domestic Product (GDP) by roughly 30%. Such negative impacts are now progressively declining but, at the end of June 2020, GDP is still about 8.5% lower than it would have been without the outbreak. Keywords COVID-19 · Coronavirus · Economic impacts · Lockdown · GDP · Electricity quantity · Wholesale electricity markets · Pandemic · Fixed-effect regression · Highfrequency estimates · Real-time monitoring
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1064 0-020-00467-4) contains supplementary material, which is available to authorized users. * Carlo Fezzi [email protected] Valeria Fanghella [email protected] 1
Department of Economics and Management, University of Trento, Via Vigilio Inama 5, 38122 Trento, Italy
2
Land, Environment, Economics and Policy Institute (LEEP), Department of Economics, University of Exeter Business School, Exeter, UK
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C. Fezzi, V. Fanghella
1 Introduction COVID-19, the disease caused by Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-COV-2), first struck in China’s Hubei Province at the end of 2019 (Zhu et al. 2020). It quickly spread across the globe and was recognized by the World Health Organization (WHO) as a pandemic on the 11th of March 2020 (WHO 2020). At the time of writing, at the beginning of July 2020, the pandemic has resulted in excess of 11 million confirmed cases and more than 500,000 deaths. In order to reduce the pace of the infection, most countries introduced a variety of containment strategies, such as lockdowns, international and national travel restrictions, social-distancing and shutdowns of non-essential businesses, schools and public offices. These measures have saved lives by reducing the contagion and alleviating the burden on health care systems (e.g. Anderson et al. 2020). However, they have also generated substantial d
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