Coronavirus: how to handle a supply shock?

Based on Chinese health data, quarantine measures appear to be effective in curbing the spread of the coronavirus, but they are hindering all or part of the country’s economic activity. This is typically a negative supply shock. At the macroeconomic level, this type of shock is quite rare. Most recessions are caused by negative demand shocks following a fall in the purchasing power of income or the value of assets. Over the decades, economic policy has made progress in supporting...