The more lockdowns there are, the weaker the economic rebound will be

We illustrate our analysis with the cases of France and the euro zone. After the first lockdown in the second quarter of 2020, the economy rebounded strongly in the third quarter. But we believe that the economic rebound in the first quarter of 2021 after the lockdown in the fourth quarter of 2020 will be weaker, and that if there is another lockdown in the second quarter of 2021 then the rebound in the third quarter of 2021 will be weaker still. Why does each new lockdown weaken the subsequent economic rebound? First, in the third quarter of 2020, very few people expected there would be a second lockdown; Each lockdown increases uncertainty and precautionary behaviour : increase in household savings, increase in corporate cash reserves; Each lockdown leads to a further deterioration in corporate balance sheets and to an increase in the proportion of zombie firms .