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Fight the Pandemic, Save the Economy
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Fight the Pandemic, Save the Economy

Lessons from the 1918 Flu

Sergio Correia, Stephan Luck and Emil Verner
Federal Reserve Bank of New York, 2020
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Many business leaders and politicians worry about the financial pain the COVID-19 crisis is inflicting on the US economy. But do public health policies like social distancing and quarantines worsen a downturn? In this brief research note, economists Sergio Correia, Stephan Luck and Emil Verner examine what happened during and after the 1918 flu pandemic for clues about COVID-19’s eventual economic impacts. They conclude that healthy people and a healthy economy are both possible.

Take-Aways

  • The 1918 influenza outbreak offers insights about the potential duration and severity of COVID-19’s economic damage.
  • Research shows that higher mortality rates correlated with sharper and more persistent economic declines a century ago.
  • The earlier and stricter the public health interventions, the quicker and more robust the economic recovery.

About the Authors

Sergio Correia is an economist at the Board of Governors of the Federal Reserve System. Stephan Luck is an economist at the Federal Reserve Bank of New York. Emil Verner is an assistant professor of finance at the MIT Sloan School of Management.

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