A presentation delivered by Viral Acharya and his colleagues at New York University Stern School of Business said that COVID-19 has many similarities with Global Financial Crisis of 2008 and there are some stark differences as well. It also says that this is once-in-a-century pandemic emanated from Wuhan and has engulfed most of the globe.
In this presentation, Acharya, who is a former deputy governor of Reserve Bank of India and now a professor of economics at New York University Stern School of Business, threw light on almost all important dimensions concerned with this pandemic.
This document explains that due to the pandemic there are supply chain disruptions, bringing the production to a screeching halt, coupled with demand side collapse due to isolation and social distancing measures. This has led to amplification mechanisms such as “oil price war.”
This pandemic is having maximum impact on certain services like entertainment, transport, micro small and medium enterprises.
According to the presentation, COVID-19 is similar to a global financial crisis in the sense that this has high leverage in certain sectors of the economy and global spill over through the financial sector.
However, talking about the difference, it mentions that this pandemic is different in a way that now there is better state of household and banking sector balance sheets.
This presentation also answers a question as to how the COVID-19 has played out financially? It says there have been a pervasive and precipitous collapse.
Acharya with his colleagues have suggested policy responses and mention that medically social distancing, isolation, testing are the measures and financially the governments should come up with rate cuts, market wide liquidity. On the fiscal side, they should have unemployment insurance, paid leave, helicopter cash drop, tax deferrals, which will mitigate the damage done to the economy by this virus.