A new EBRD Working Paper (number 259)
This paper traces the relationship between quarterly estimates of economic activity and people's mobility during the Covid-19 crisis in a sample of 53 economies. Over time, the estimates of elasticity of value added with respect to mobility have been declining, to around 20 percent at the start of 2021, attesting to the gradual adjustment of global economic activity to social distancing. Yet this adjustment appears to be modest, with economic recovery driven primarily by greater mobility. The analysis relies on country-specific estimates of potential economic growth consistent with normal mobility. The paper also proposes a simple approach to combining various aspects of mobility in a single index using country-specific weights. Out-of-sample forecasts of growth derived from mobility estimates perform well relative to random walk, medium-term potential growth and other benchmarks.