Social Distancing and the Macrofinancial Consequences of Natural Disasters

We use the COVID-19 pandemic as a natural experiment to estimate the effects of a global disaster shock on economic activity, international trade, and financial markets. To identify the shock, we exploit cross-country variation in the timing and intensity of pandemic-induced social distancing at daily frequency. An unexpected reduction in human mobility relative to pre-pandemic levels leads to significant declines in high-frequency measures of global economic activity, such as daily nitrogen dioxide concentrations and daily maritime trade carried by large cargo ships. Global stock markets decline, and sovereign credit spreads persistently widen after the pandemic disaster shock