Pandemic, sentiments over COVID-19, and EU convergence

Abstract

AbstractThis study examines the convergence/divergence of people's sentiments over Covid-19 in European economies and investigates the role of the support policies that were implemented by governments and central banks. The analysis focuses on 26 EU countries plus the UK, using changes in human mobility to essential places as a proxy for pessimistic/optimistic sentiments. Based on a panel-clustering methodology and multinomial logistic regressions, the results suggest heterogeneous effects of Covid-19 on people’s behavior in Europe, which were not drastically reduced through fiscal- or monetary-policy interventions. Heterogeneous Covid-19 impacts are a matter of concern in the EU context, where harmonization is a primary target. Thus, given the need for harmonization, additional EU-wide support policies are necessary in the post-Covid-19 era in order to effectively address asymmetries across member economies and restore the convergence process.