APPLICATION OF UNCONVENTIONAL MONETARY POLICY INSTRUMENTS IN MITIGATION OF THE ECONOMIC CONSEQUENCES OF THE COVID 19 VIRUS PANDEMIC

Marina Đorđević, Jadranka Đurović Todorović, Milica Ristić Cakić

DOI Number
-
First page
231
Last page
248

Abstract


Unconventional monetary policy instruments are used in conditions when monetary policy has exhausted all the usual measures and instruments that are otherwise applied by the central bank in the regular process of conducting monetary policy. The most commonly used instruments are, of course, quantitative easing or quantitative alleviation.

The aim of this paper is to point out the application of unconventional monetary policy instruments during the economic crisis caused by the COVID 19 virus pandemic in the most important banks in the world. After a theoretical overview of the concept of quantitative easing, the paper presents the empirical experiences of the Bank of Japan, the Fed, the ECB, and other central banks. Based on the analysis of applied measures and data on the use of quantitative facilities in selected central banks, it can be concluded that they resorted to the use of this instrument in times of crisis to a greater or lesser intensity. Also, the increased liquidity caused by their implementation had a significant impact on aggregate demand, inflation and GDP. This analysis can be useful to the monetary authorities in Serbia if they are to review the application of QE in the leading monetary institutions and help them to draw the conclusions that would lead to the most painless application of this instrument in the Republic of Serbia.

Keywords

monetary policy, central bank, quantitative easing (QE), „helicopter money”

Full Text:

PDF

References


Asset purchase programmes ECB, Avaliable at: https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html#abspp

Baker S. R., Bloom N., Davis S. J., Kost K., Sammon M., & Viratyosin T. (2020). The Unprecedented Stock Market Reaction to Covid-19. Covid Economics 1(1), 33-42.

Bank of Canada Available at: https://www.bankofcanada.ca/

Bank of England. Available at: https://www.bankofengland.co.uk/monetary-policy/quantitative-easing

Bank of Japan. Available at: https://www.boj.or.jp/en/mopo/index.htm/

Basistha, A., & Kurov, A. (2008). Macroeconomic cycles and the stock market's reaction to monetary policy. Journal of Banking and Finance 32(3), 2606–2616.

Bernanke, B. S., & Kuttner, K. N. (2005). What explains the stock market’s reaction to federal reserve policy?. Journal of Finance 60(3), 1221–1257.

Bernanke, S. B. (2017). Monetary Policy in a New Era. Brookings Institution, Prepared for conference on Rethinking Macroeconomic Policy, Peterson Institute, Washington DC, October 12-13, 2017.

Blattner, S. T., & Joyce A. S. M. (2020). The Euro Area Bond Free Float and the Implications for QE. Journal of Money, Credit and Banking, https://doi.org/10.1111/jmcb.12685

Blinder, A. (2010), Quantitative Easing, Entrance and Exit Strategies. CEPS Working Paper No. 204.

Bloomberg (2020, March 17). Trump Pushes $1.2 Trillion Stimulus, $1,000 Checks in Two Weeks, Available at: https://www.bloomberg.com/news/articles/2020-03-17/mnuchin-says-trump-wants-money-sent-to-americans-in-two-weeks

Borio C., Disyatat P., & Zabai, A. (2016). Helicopter Money: The Illusion of a Free Lunch. Vox, CEPR, May 24.

Bruegel (2020). COVID-19 Fiscal Response: What Are the Options for the EU Council?. by Gregory Claeys and G.B. Wolff, Blog Post, March 26.

Central bank of Russia. Available at: https://www.cbr.ru/eng/search/?text=monetary+policy

Chebbi, T. (2016). The response of oil market to U.S. monetary policy surprises. International Journal of Economic Policy in Emerging Economies, Forthcoming.

Chebbi, T., & Derbali, A. (2019). US monetary policy surprises transmission to European stock markets. International Journal of Monetary Economics and Finance 12(1), https://www.inderscience.com/info/inarticletoc.php?jcode=ijmef&year=2019&vol=12&issue=1

Corona virus outbreak: EIB Group’s response, Avaliable at: https://www.eib.org/en/about/initiatives/covid-19-response/index.htm

Dahlhaus, T., Hess, K., & Reza, A. (2018), International Transmission Channels of U.S. Quantitative Easing: Evidence from Canada. Journal of Money, Credit and Banking, 50(2-3), 545-563.

Federal Reserve Bank. Available at: https://www.federalreserve.gov/monetarypolicy.htm

Financial Times. Available at: https://www.ft.com

Forbes. Available at: https://www.forbes.com

Friedman M. (1969). The optimum quantity of money. In M. Friedman, The Optimum Quantity of Money and Other Essays, Chapter One, Adline Publishing Company, Chicago

Handa, J. (2000) Monetary Economics. London: Routledge.

Hanes, C. (2018). Quantitative Easing in the 1930s. Journal of money, credit and banking 51(5), 1169-1207.

Howells, P., & Keith, B. (2008). The economics of money, banking and finance. London: Pearson Education.

Hubbard, G. (2005). Money, the financial system and the economy, Boston: Pearson.

Judd, J. P., Motley, B. (1992). Controlling inflation with an interest rate instrument. Economic review, Federal Reserve Bank of San Francisco, 3, FRASER, St.Louis

Lewis, M. K., & Mizen, P. D. (2000). Monetary Economics. New York: Oxford University Press.

Luck, S., & Zimmermann, T. (2018). Employment Effects of Unconventional Monetary Policy: Evidence from QE. Finance and Economics Discussion, Series 2018-071, Board of Governors of the Federal Reserve System (U.S.), revised 24 Oct 2018, Available at: https://ideas.repec.org/p/fip/fedgfe/2018-71.html

Masciandaro, D. (2020). Covid-19 Helikopter money, Monetary Policy and Central Bank Independence: Economics and Politics, Bocconi Universita, Working Paper no. 137, April 2020

Mishkin F., (2004). The economics of money, banking and financial markets, Boston: Pearson.

Mishkin, S. F. (1999). International experiences with different monetary policy regimes. Journal of monetary economics, 43(3), 579–607.

Nickolas, S. (2017). What is the difference between helicopter money and QE?. Avaliable at: https://www.investopedia.com/articles/personal-finance/082216/what-difference-between-helicopter-money-and-qe.asp

O'Neill, J. (2020). It’s time for a people’s QE, The Article - Exchange on politics and policy, Avaliable at: https://www.thearticle.com/its-time-for-a-peoples-qe (8.5.2020)

Pandemic emergency purchase programme (PEPP), Avaliable at: https://www.ecb.europa.eu/mopo/implement/pepp/html/index.en.html

Reserve bank of Australia. Available at: https://www.rba.gov.au/monetary-policy/

Ueda, K. (2012). Japan's Deflation and the Bank of Japan's Experience with Nontraditional Monetary Policy. Journal of money, credit and banking, 44(1), 175-190.

Waltenberger I. (2020). The Range of Different Opinions and Moods in Germany on Collective “Corona Bonds”. SUERF Policy Notes, n. 155


Refbacks

  • There are currently no refbacks.


ISSN 0354-4699 (Print)

ISSN 2406-050X (Online)