The impact of government responses to the COVID-19 pandemic on GDP growth: Does strategy matter?

We analyze whether and to what extent strategies employed by governments to fight the COVID-19 pandemic made a difference for GDP growth developments in 2020. Based on the strength and speed with which governments imposed non-pharmaceutical interventions (NPIs) when confronted with waves of infections we distinguish between countries pursuing an elimination strategy and countries following a suppression / mitigation strategy. For a sample of 44 countries fixed effect panel regression results show that NPI changes conducted by elimination strategy countries had a less severe effect on GDP growth than NPI changes in suppression / mitigation strategy countries: strategy matters. However, this result is sensitive to the countries identified as "elimination countries" and to the sample composition. Moreover, we find that exogenous country characteristics drive the choice of strategy. At the same time our results show that countries successfully applying the elimination strategy achieved better health outcomes than their peers without having to accept lower growth.