toll of the coronavirus crisis you're

not alone.

It's scary there is no clear forecast

and each country's experience will be

different. Here's what we do know a

steady flow of money, goods, services and

the people to make them flow is

essential to a healthy economy. And, that

flow is severed right now by life

savings stay-at-home orders recession is

inevitable but what kind of recession it

will be and what recovery might look

like is still unclear to help imagine

what could happen authors from Boston

Consulting Group point out that

recessions and their recoveries come in

various shock shapes these are

determined by how hard a crisis hits the

supply side of an economy that's an

economy's inputs capital like machinery

factories software labor or workers plus

productivity or how we use labor and

capital productively the heart of the

supply side is hit the more credit is

interrupted meaning less money is

injected in the form of loans to

businesses and individuals to fuel

investment and the more difficult it is

for productivity to recover from best to

worst we have V U and L recession shock

shapes the V shape is a one-time dip if

credit can continue to flow productivity

and labor are less affected you can see

that growth dips but recovers to its

pre-crisis level and rate B U shape is

much more costly credit flow is

disrupted and growth drops precipitously

never rebounding to its pre-crisis path

the rate of growth recovers see how the

slopes are the same but a large gap

between the old and new paths represents

one-off damage to the economy

supply-side the L shape is the worst

credit is severely disrupted not once

but perpetually and there is very little

new investment this economy never

recovers its prior output path and the

rate of growth also declines the crisis

leaves permanent structural damage to

the economy supply-side

these examples represent crises that

started in the financial sector

disrupting credit flow in this capital

growth we have some off-the-shelf

policies for dealing with these however

we are now in uncharted territory with a

double risk of a financial system shock

and an epic freeze of the real economy

the households firms and government that

deliver real physical goods and services

countries have no existing playbook for

dealing with this double shock months of

necessary social distancing raises the

risk of both types of problems which can

feed off each other in dangerous ways

for example a prolonged crisis can drive

up real economy bankruptcies of everyday

people in firms making it harder for

financial systems to manage and a

financial system crisis would starve the

real economy of credit which could

cripple investment and ultimately growth

in this combined crisis capital does not

grow pushing the economy towards a

u-shape not good however we can head off

a you or l-shaped recovery and lessen

the intensity of the crisis how

primarily innovation on the medical side

vaccines treatments and capacity

innovations are needed to save lives and

end the economic damage caused by social

distancing on the economic side in

addition to a vigorous and efficient

policy response we will need policy

innovations for example in the u.s. the

2 trillion dollar stimulus bill is just

a start we will need innovative ways to

deliver that money to those who need it

since never before have policymakers had

to help such large numbers of firms and

households for example the so called

discount windows that allow unlimited

access to funding for the financial

sector could be replicated for

households and firms in the real economy

so that they can stay afloat

zero-interest bridge loans to households

and firms a moratorium on mortgage

payments for residential and commercial

borrowers these are potential solutions

that could help make a real difference

the economic goal is to keep our shocks

shape closer to a V and further away

from a u or an L

speedy well-executed medical and policy

innovations are our best hope to save

the most lives and avoid permanent

economic damage