This paper studies the impact of the COVID-19 epidemic on economic and health outcomes in China from January 20 to September 28, 2020. We first document China’s containment policies and present empirical evidence on the role of the online economy. We then use a SIR-macro model to study the macroeconomic and health outcomes of the epidemic. The model can generate infection and death dynamics broadly consistent with the data and the U-shaped recovery of the Chinese economy at the weekly frequency. The analysis reveals that, in addition to the containment policies, the development of the online economy (both online consumption and remote work) plays a critical role in fighting an epidemic.

We augment an overlapping generations endogenous credit cycle model with environmental externalities and two regulatory authorities to study how fiscal and financial environmental regulation together shape environmental quality, macroeconomic stability, and income distribution. Environmental quality depends on pollution from the brown sector, regulated either through environmental haircuts on collateral or via tax-financed abatement and environmental improvements. We find that haircuts and taxes affect emissions, income distribution, and system stability in distinct ways, with interaction effects that create trade-offs between environmental outcomes and macroeconomic stability. Compared to scenarios with only financial regulation, introducing an environmental tax maintains similar environmental quality but achieves higher aggregate income and capital per worker. However, we uncover intergenerational trade-offs as environmental regulation improves environmental quality and raises incomes for younger agents and investors but lowers and destabilizes the returns of older generations reliant on capital income.