Ambiguity in a pandemic recession, asset prices, and lockdown policy

Morimoto, Keiichi; Suzuki, Shiba

doi:10.1111/jpet.12591

Cited by 9 publications

(5 citation statements)

References 47 publications

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“…It could also be extended to a more economic framework that would evaluate the cost and benefits of vaccination, and their consequences for firms and markets (see, e.g. Morimoto and Suzuki (2022)).…”

Section: Discussionmentioning

confidence: 99%

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Vaccination under pessimistic expectations in clinical trials and immunization campaigns

d’Albis

Etner

Thuilliez

2022

J Public Economic Theory

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We provide one of the first formalizations of a vaccination campaign in a decisiontheoretic framework. We analyse a model where an ambiguity-averse individual must decide how much effort to invest into prevention in the context of a rampant disease.We study how ambiguity aversion affects the effort and the estimation of the vaccine efficacy in clinical trials and immunization campaigns. We find that the behaviours of individuals participating in a clinical trial differ from individuals not participating. Individuals who are more optimistic toward vaccination participate more in trials. Their behaviours and efforts are also affected. As a result, because vaccine efficacy depends on unobserved behaviours and efforts, the biological effect of the vaccine becomes difficult to evaluate. During the scale-up phase of a vaccination campaign, provided that vaccine efficacy is established, we show that vaccine hesitancy may still be rational.

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Section: Discussionmentioning

confidence: 99%

“…This would make it possible to characterize the waiting strategies of part of the population. It could also be extended to a more economic framework that would evaluate the cost and benefits of vaccination, and their consequences for firms and markets (see, e.g., Morimoto et al, 2022). Given the assumptions U c H ( , ) > 0…”

Section: Discussionmentioning

confidence: 99%

Vaccination under pessimistic expectations in clinical trials and immunization campaigns

d’Albis

Etner

Thuilliez

2022

J Public Economic Theory

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“…A growing number of economic analyses unveiled since March 2020 study optimal social distancing during a pandemic (Acemoglu et al, 2021;Aguirregabiria et al, 2021;Alvarez et al, 2021;Brotherhood et al, 2020;Eichenbaum et al, 2021;Hall et al, 2020;Kruse & Strack, 2020;Makris & Toxvaerd, 2020;Morimoto & Suzuki, 2022). Assumptions about vaccinearrival feature prominently in this literature, although we know of only four papers that consider the effect of a change in vaccine-arrival time on optimal policy.…”

Section: Related Literaturementioning

confidence: 99%

Optimal social distancing and the economics of uncertain vaccine arrival

Iverson

Karp

Peri

2022

J Public Economic Theory

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We analytically identify two mechanisms that explain why a later arrival time for a pandemic-ending vaccine has an ambiguous effect on optimal social-distancing policy. We assess the net effect of these channels using a quantitative model solved for over a thousand parameter combinations. Optimal policy and welfare comparisons are both highly sensitive to beliefs about vaccine arrival. A policy of moving quickly to herd immunity by requiring social distancing for only the most vulnerable might be loosely justified for expected vaccine arrivals over 2 years, but becomes catastrophic if the expected arrival is within a year. | INTRODUCTIONExpectations about the time needed to develop and distribute a COVID-19 vaccine evolved quickly during the first year of the pandemic. An informal survey of experts from February 2020 concluded that developing, licensing, and manufacturing a vaccine within 12 months would be remarkable, even revolutionary (Kormann, 2020). In July, a formal expert elicitation put September 2021 as the best guess for widespread public access (Kane et al., 2020). Many also recognized that a vaccine might prove elusive, as it has for other important diseases, such as AIDS and the common cold. In the end, the vaccine arrived faster than expected, with Britain becoming the first Organisation for Economic Cooperation and Development country to approve a vaccine on December 3, 2020.At least since Yaari (1965), economists have understood the relation between discounting and the expected time of an event that ends a problem: death in Yaari's setting and vaccine arrival in the epidemic context. Earlier expected arrival makes the future less extensive and therefore less important, having qualitatively the same effect on optimal planning as a higher discount rate. Nevertheless, the impact of vaccine arrival in a Susceptible-Infected-Removed

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“…The paper by Morimoto and Suzuki (2022) presents a theoretical model to explain the Kshaped asset price fluctuations exhibited during the 2020 coronavirus pandemic recession. Using an asset pricing model of a multisector production economy including pandemic disaster, the paper explains the average stock price boom and significant cross-sectional variation of stock returns in the United States and Japan during the COVID-19 pandemic recession.…”

Section: Public Finance and Asset Pricesmentioning

confidence: 99%