Initial Conditions and Cross-Country Macroeconomic Impact during COVID-19

The objective of this study is to analyse the correlation between initial conditions and cross-country macroeconomic impact of COVID-19 on OECD economies. The study uses group-wise multivariate linear regression modelling to examine the link between macroeconomic variables of interest and the duration of the pandemic, severity of its impact, and annual investment growth rate. The main result from the study shows that variables related to debt such as domestic credit to private sector, private sector debt and debt-to-GDP ratio had significant relationship with the duration and severity of the crisis as well as the investment growth rate during COVID-19. The original contribution of the study is in bringing out the correlation between initial conditions and first order effects of the pandemic on the economy. The policy implications of the results indicate short, medium and long-term measures required to mitigate the systematic risk posed by the pandemic