A new approach to coronavirus testing necessary to contain uncertainty

“In times of a pandemic, economic policy must be closely linked to health policy requirements. Both policy areas can only be reconciled on an evidence-based basis. For this, we urgently must test representative subsamples of the entire population,” said Kiel Institute President Gabriel Felbermayr. This would significantly reduce the existing uncertainty. The Kiel Institute proposes to conduct such tests at high frequency (every five days). The presumably low level of infestation to date suggests a sample size of 10,000 people in order to obtain meaningful results. On the basis of the values obtained, more reliable statements on morbidity and mortality rates can then be derived for the first time. So far, only very specific population groups have been tested, making it impossible to draw conclusions about the total population. The values differ considerably in international comparison, which is probably due to the fact that very different groups of people are tested depending on the country. This makes it considerably more difficult to evaluate defense measures and also prevents countries from learning from each other. Therefore, the Kiel Institute recommends that these tests be carried out in all EU member states.

Uncertainty is a major economic problem in the coronavirus crisis because the course of the pandemic is impossible to predict with reliable data. Hence, the duration and scope of the defense measures remain unclear. The level and course of the infection rate play an important role. The less certain one is about the percentage of infected people in the population, the more extensive preventive measures must be taken to contain the risk of an overburdened health care system. As a result, the costs of lost production activity increase. In addition, companies find it more difficult to plan their operating processes, which places an additional burden on economic performance. In particular, high uncertainty about the dynamics of the pandemic means that the exit from the current shutdown strategy tends to have to be postponed too far into the future. If incisive measures based on systematic infection screening are successful, they will also help to prevent aberrant and politically destabilizing narratives in the aftermath of the pandemic.

Kiel Institute’s head of forecasting Stefan Kooths: “Light at the end of the tunnel has a stabilizing effect on the economy, but rampant uncertainty is poison for macroeconomic stability. As soon as the threatening phantom has turned into a predictable phenomenon, the recovery of production processes can set in.” 

The proposed broad-based tests are not primarily intended for disease control in the narrower sense (isolation of infected persons), but are intended to provide information on the overall course of the disease in order to prevent too little or too much being done to contain the health crisis. For this reason, the accuracy of the tests in individual cases is less important than reliable estimates of averages. For this reason, even simple antibody tests that spare the laboratories’ testing capacities may be sufficient. Should bottlenecks in test capacity occur, such that broad-spectrum tests compete with medically required individual tests, the latter must take priority.

Anything that reduces uncertainty for the economic players helps. The sooner it becomes clear how long the current emergency measures have to be maintained, the easier it will be for companies and banks to develop adequate bridging plans and also to call on state support in an appropriate manner.

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The IPE Institute for Policy Evaluation in Frankfurt also advocates the use of representative tests. More about this here.