This paper develops a methodology for tracking in real-time the impact of shocks (such as natural disasters, financial crises or pandemics) on gross domestic product (GDP) by analyzing high-frequency electricity market data. As an illustration, we estimate the GDP loss caused by COVID-19 in twelve European countries during the first wave of the pandemic. Our results are almost indistinguishable from the official statistics during the first two quarters of 2020 (the correlation coefficient is 0.98) and are validated by several robustness tests. We provide estimates that are more chronologically disaggregated and up-to-date than standard macroeconomic indicators and, therefore, can provide timely information for policy evaluation in time of crisis. Our results show that pursuing “herd immunity” did not shelter from the harmful economic impacts of the first wave of the pandemic. They also suggest that coordinating policies internationally is fundamental for minimizing spillover effects from non-pharmaceutical interventions across countries.
Many thanks to Ian Bateman, Marco Cucculelli and the participant of the webinar “Economics and Covid 19″ organized by the Italian Economics Society for their constructive comments on a previous version of this paper. We are grateful to the Guest Editors, Cecile Aubert and Flavio Toxvaerd, and the anonymous Reviewers for their suggestions which greatly helped improving the quality of this work.
