The global economy has faced two major systemic shocks in recent years: the COVID-19 pandemic beginning in early 2020 and Russia’s invasion of Ukraine in February 2022. Each event has had profound and far-reaching economic consequences, disrupting global supply chains, altering energy markets, and reshaping fiscal and monetary policy landscapes. While distinct in nature—one a public health crisis, the other a geopolitical conflict—both have exposed vulnerabilities in the global economic system and triggered significant policy responses.

The COVID-19 pandemic began in late 2019, when a novel coronavirus (SARS-CoV-2) was first identified in Wuhan, China, and rapidly spread across the globe, prompting the World Health Organization to declare a global pandemic on March 11, 2020. Governments worldwide implemented stringent containment measures to curb the spread of the virus. These included lockdowns, social distancing mandates, travel restrictions, and the closure of non-essential businesses. While necessary for public health, these measures had severe economic repercussions, particularly in sectors such as tourism, hospitality, and retail. Indeed, the COVID-19 pandemic precipitated the sharpest global economic contraction since the Great Depression. Moreover, the pandemic accelerated the adoption of remote work, with many businesses transitioning to work from home arrangements to maintain operations. This shift had significant implications for productivity, work–life balance, and the future of work.

The post-pandemic reopening phase during 2021 was characterized by shifts in consumer spending, supply chain bottlenecks, and energy and food price hikes associated to rising demand and the resumption of travel. In this context, Russia launched a full-scale invasion of Ukraine on February 24, 2022, triggering widespread international condemnation and a global geopolitical crisis that introduced a new layer of economic disruption. The war triggered a humanitarian crisis and devastated Ukraine’s economy, but its effects extended globally through commodity markets, trade, and financial systems. Energy markets were particularly affected, especially in the case of Europe—heavily reliant on Russian natural gas—that faced soaring energy prices and supply shortages.

In response to this unprecedented sequence of shocks, various measures to support households and businesses were implemented. In the case of the pandemic-induced crisis, these included temporary furlough schemes to preserve employment, liquidity support for SMEs and self-employed workers and public investment through the EU’s Recovery and Resilience Facility (RRF), the major instrument of the Next Generation EU (NGEU) program initiated by the European Union to support member states in recovering from the economic impact of the COVID-19 pandemic. In the case of the so-called energy crisis in Europe, it is worth highlighting measures such as fuel subsidies and VAT tax cuts to reduce household and business costs, windfall taxes on energy companies and support for vulnerable groups, including direct payments and rent caps. Finally, both crises contributed to a global inflation surge. Initially driven by supply chain disruptions and pent-up demand post-COVID, inflation was further fueled by the energy and food price shocks from the Ukraine war. Central banks, particularly in advanced economies, responded by tightening monetary policy and raising interest rates aggressively, ending a decade-long era of ultra-low rates.

All in all, the COVID-19 pandemic and the subsequent energy crisis triggered by geopolitical tensions have had far-reaching economic consequences, affecting labor markets, inflation dynamics, public finances, global supply chains, and the design of fiscal, monetary and energy policies across Europe and beyond.

Given the breadth and complexity of these issues, it is beyond the scope of this Special Issue to address all the dimensions and policy challenges they have raised. Instead, the contributions in this Special Issue focus on a selection of timely and policy-relevant topics, including the effects of pandemic-related containment measures, the labor market implications of remote work, the effectiveness of subsidies and tax-based measures in response to the inflation surge, and the role of European recovery instruments such as the NGEU program. We extend our sincere gratitude to the colleagues who responded to our call by contributing high-quality research. We are also deeply indebted to the reviewers, whose timely and thoughtful evaluations—often under tight deadlines—were instrumental in shaping the final selection. Their efforts have undoubtedly enhanced the quality of this Special Issue.

The effectiveness of pandemic-related containment measures is analyzed in the paper by Fidel Pérez-Sebastián and Rafael Serrano-Quintero by developing a spatial trade model that incorporates supply chain linkages to analyze the role of economic interconnections and containment policies in the spread of COVID-19 across regions in the European Union and the United Kingdom. Fidel and Rafael find that trade-related transmission accounted for approximately 10% of COVID-19-related deaths across Europe. Also, their counterfactual simulations indicate that, in the absence of policy interventions, the death toll could have been 4.52 million higher in the European Union, with significant regional heterogeneity.

The evolution of remote work and its labor market implications are explored in the paper by Vahagn Jerbashian and Montserrat Vilalta-Bufí. Analyzing working-from-home (WFH) patterns in European Union countries, Vahagn and Montserrat document a sharp and widespread rise in WFH at the onset of the pandemic, while the analysis also reveals substantial cross-country, sectoral, and occupational variation in WFH prevalence. Turning to the implications, the study also finds that higher WFH capacity is associated with lower employment losses during the pandemic and proposes a measure of WFH capacity across countries based on observed patterns, offering insights into labor market resilience.

In response to the energy price surge following Russia’s invasion of Ukraine, the Spanish Government introduced a fuel subsidy to alleviate the impact of the price hike on consumers. The paper by Juan Luis Jiménez, Jordi Perdiguero and José Manuel Cazorla-Artiles estimates the pass-through of this subsidy to petrol consumer prices. Employing a difference-in-differences approach and comparing Spain with other EU countries that did not implement similar measures as a control group, Juan Luis, Jordi, and José Manuel estimate that the pass-through rate was around 75% for diesel, and almost full for petrol 95. Their analysis thus reveals that a significant part of the total subsidy cost for diesel was retained by fuel companies, raising questions about the efficiency of such interventions.

Another fiscal intervention approved by the Spanish Government to mitigate the impact of rising energy prices was the temporary value added tax (VAT) rate reduction for selected products in January 2023. The paper by Nicolas Forteza, Elvira Prades and Marc Roca estimates the pass-through of this VAT cut to consumer prices by exploiting a novel dataset with daily prices of roughly 21.000 food products sold on-line in a Spanish supermarket. Nicolas, Elvira, and Marc identify the pass-through by comparing the evolution of prices for treated items subject to the VAT cut against a control group not affected by the cut. According to their estimates, the pass-through was almost complete after one week, while there is significant heterogeneity across products in the estimated pass-through and pricing strategy in subsequent weeks.

Finally, turning to the NGEU program, the paper by Rubén Domínguez-Díaz, Samuel Hurtado, and Carolina Menéndez introduces a general equilibrium model with endogenous growth and firm dynamics to assess its medium-term macroeconomic effects in Spain. The model, calibrated using both aggregate and firm-level data, simulates the impact of various NGEU components, including public investment, private capital transfers, and innovation subsidies. Rubén, Samuel, and Carolina find that the program could significantly raise annual GDP growth—between 0.08 and 0.13 percentage points—through indirect channels beyond the direct fiscal impact. Productivity gains, driven by innovation-related transfers and efficient public investment, emerge as key channels through which the fiscal stimulus enhances aggregate output in the medium-term.

We hope that the contributions in this Special Issue offer new insights into the economic and policy responses to the recent supply driven shocks associated to the COVID-19 pandemic and the energy crisis, as well as the policy innovations that have emerged in their wake. We also hope that readers find these articles both thought-provoking and interesting, and that they serve as a catalyst for further research in these areas.