Report
Patrick Artus

COVID crisis: How to correct the effects of high uncertainty over the future?

There is much uncertainty over the future as a result of the COVID crisis, the fact that it is persist ing with several waves and the fact that it will give rise to permanent but hard-to-predict changes in the economy and in behaviour. When there is high uncertainty over the future: Economic agents refuse to make irreversible decisions (hiring, investment, housing purchases, investments in illiquid assets, etc.); Economic agents keep a high level of precautionary savings in liquid or cash form and invest little on the whole. How can economic policy then correct this uncertainty over the future? We can think of the introduction of: Contingent-repayment loans: repayment only takes place once the situation of the economy (or the borrower) has become good again. This would be a form of insurance against uncertainty over the future; Incentives to spend faster and sooner: accelerated depreciation of investments, temporary VAT cuts, negative-interest-rate loans, hiring subsidies.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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