Edouard Challe discussion of: Bailouts

The policy response to the Covid crisis in advanced economies was unprecedented, both in terms of scale and diversity of policy instruments. Given the substantial fiscal burden it has generated, it is legitimate to ask how effective this response was. This question turns out to be much harder to answer than casual discussions in the public debate may suggest. The reason for this is that we observe the world as it unfolds before our eyes given the policies in place, but not what it would have been under hypothetical alternative policies. We may always speculate about how many jobs, firms or banks we saved during the Covid crisis, but it ultimately takes a model, and the ability to run counterfactual experiments with it, to get a sense of the benefits associated with specific policies.