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What Economic Effects Do Travel Bans Have on the United States Economy?

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Let's turn now to the economic impact of the coronavirus outbreak. And we're not just talking about the stock market here

Today, for example, we're hearing that the Trump administration is increasing its restrictions on travel from Europe to include Ireland and the United Kingdom now. And at today's White House briefing, President Trump said he's considering restrictions on domestic travel as well - two additional steps intended to help slow down the spread of the coronavirus but which could also come with a big price tag for the U.S. economy.

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Already, U.S. Centers for Disease Control and Prevention (CDC) officials are preparing for the scenario in which the virus evolves into a pandemic—a scenario in which businesses and schools may have to be shuttered for weeks to contain further spread of the virus. As a coronavirus pandemic looms large, how it may affect world economy becomes a major concern. Since the situation worldwide is still evolving, it's too early to make even a rough estimate of the exact overall cost to the global economy. That, however, does not prevent us from exploring some of the ways in which a full pandemic would lead to economic downturns. Few would dispute that a coronavirus pandemic may take a heavy toll on the world economy

Still, the economic impact may be more complex than we have thought.As former World Bank economist Maureen Lewis reminds us, the relationship between the costs inflicted at the micro level and those on the whole society may vary across epidemics. Demographic restructuring caused by the Black Death in the fourteenth century, for example, fostered the possibility of new economic growth by leaving the attenuated population in Europe with substantially more resources to exploit. All else being equal, a disease that kills only the elderly or infirm can even have the perverse effect of raising the GDP per capita, provided that those at the most productive ages survive. But there are fewer people in total to share the wealth. How the economic impact will unfold to a large extent is decided by the nature and the trajectory of COVID-19 if it becomes a pandemic, which seems increasingly likely.

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Travel restrictions were included in the WHO interim protocol: rapid operations to contain the initial emergence of pandemic influenza that was published in 2007 by the World Health Organization (WHO). However, as they would hamper global travel and trade, such restrictions are not recommended by WHO once the global spread of pandemic influenza is established. In 2009, some countries applied travel restrictions as one of several strategies to prevent the introduction of the influenza virus A(H1N1)pdm09 into their territories but the effectiveness of this approach has subsequently been questioned. Research on influenza has focused on the evaluation of the effectiveness and impact of pharmaceutical interventions. As quantitative assessment of the effectiveness of travel restrictions in pandemic situations tends to be more challenging, there are scarce data on this topic. In any meta-analysis of surveillance data from multiple studies, it is difficult to quantify and compare the effectiveness of travel restrictions because such interventions are frequently implemented with other countermeasures and without following standardized protocols. However, mathematical models can be used to predict the effectiveness of each type of intervention and inform policy-makers at national and international levels

In 2009, a systematic review of studies based on such models revealed limited evidence of the effectiveness of restrictions in air travel – within and between countries – in the containment of pandemic influenza (International Health Regulations, 2005).

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Finally, delayed shipments and production schedules create financial problems for companies with heavy debts, especially in the United States

The decline in global equity markets and flight from risk—investors selling assets such as high-yield bonds and volatile stocks—exposes investors who have underpriced risk. Concern about counterparty risk accelerates the decline and dries up liquidity in financial markets. Central banks scramble to manage the problem. Financial markets—and the global economy—recover after a V-shaped recession.

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WHO interim protocol: rapid operations to contain the initial emergence of pandemic influenza. Geneva: World Health Organization; 2007.

Pandemic influenza preparedness and response – a WHO guidance document. Geneva: World Health Organization; 2009.

International Health Regulations (2005). Geneva: World Health Organization; 2008.

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