CAFIN and UC Investments Speaker Series Financial Risks, Innovation and Inclusion in a Post-COVID World

Francis Diebold, Professor of Social Sciences
Professor of Economics, Finance, and Statistics
University of Pennsylvania

Real-Time Real Economic Activity: Exiting the Great Recession and Entering the Pandemic Recession

Exiting the Great Recession and entering the Pandemic Recession, we study the high-frequency real-activity signals provided by a leading nowcast, the ADS Index of Business Conditions produced and released in real time by the Federal Reserve Bank of Philadelphia. We track the evolution of real-time vintage beliefs and compare them to a later-vintage chronology. Entering the Pandemic Recession, real-time ADS plunges and then swings as its underlying economic indicators swing, but the ADS paths quickly converge to indicate a return to brisk positive growth by mid-May. We show, moreover, that the daily real activity path was extremely highly correlated with the daily COVID-19 path.

The economic crisis associated with COVID-19 pandemic has altered all aspects of our lives. In a new CAFIN speaker series, we will focus on financial challenges and developments. Among the questions that are relevant are: What are the risks to the global financial system in the medium to long run? Is the banking system robust enough? What kinds of future policy interventions might be necessary? What changes to payment systems and other financial innovations have been accelerated by the crisis? How do contagion control policies affect populations that are traditionally underserved by the financial sector? Will financial inclusion be more difficult to achieve after the pandemic?