As the #novelcoronavirus continues to spread, rolling out rescue measures is more urgent and will be more efficient than stimulus package in easing the impact of the pandemic and restoring normal economic activities, said Gao Shanwen in a recent piece: new.cf40.org.cn/uploads/202004…
In addition to public health expenditures, the article said the current policy focus should be on providing relief through compensating the affected enterprises and low- and middle-income residents and helping them maintain a healthy cash flow.
Compared with the idea of driving the economy through infrastructure construction, rescue measures can achieve much greater effects with relatively limited costs. Plus, it can help stabilize employment.
On the surface,government subsidizes small enterprises, which doesn’t create direct infrastructure demand &makes no contribution to the expansion of capital stock.But the overall benefit the economy receives is actually greater thanks to the powerful effect of the bailout policy.
In order to avoid long-term distortions, policy intervention is preferably reversible,that is,can be withdrawn immediately once the epidemic ends.The bailout policy satisfies such standards,but it’s difficult for infrastructure measures to be reversed in short term.
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