The determinants of output losses during the Covid-19 pandemic

The global recession in the wake of the Covid-19 pandemic was accompanied by a significant degree of heterogeneity in the economic contraction across countries. We use a rich data set and Bayesian model averaging techniques to identify the factors shaping the extent of heterogeneity. The results highlight the importance of adverse initial conditions (large contact-intensive service sector) and behavioural changes (increased voluntary spatial distancing) relative to the extent of public containment measures.