Tracking GDP in real-time using electricity market data: Insights from the first wave of COVID-19 across Europe

Carlo Fezzi; Valeria Fanghella

doi:10.1016/j.euroecorev.2021.103907

Tracking GDP in real-time using electricity market data: Insights from the first wave of COVID-19 across Europe

Eur Econ Rev. 2021 Oct:139:103907. doi: 10.1016/j.euroecorev.2021.103907. Epub 2021 Sep 11.

Authors

Carlo Fezzi^{1

2}, Valeria Fanghella³

Affiliations

¹ Department of Economics and Management, University of Trento, Trento, 38122, Italy.
² Land, Environment, Economics and Policy Institute (LEEP), Department of Economics, University of Exeter Business School, Exeter, UK.
³ Grenoble Ecole de Management, Grenoble 38000, France.

Abstract

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.

Keywords: COVID-19; Economic impact; Electricity demand; Mortality; Real-time indicators.