COVID Crisis: Fiscal, Monetary and Macro-financial Policy Responses

Abstract

The ongoing COVID-19 pandemic in the world is deepening a profound impact and economic uncertainty. In essence, lockdown and social distancing measures are triggering losses in global production, supply, trades, investments, and employment. This article, to counteract the economic losses and macroeconomic uncertainty, explores the policy evolution of macroeconomic effects during the COVID-19 pandemic. It has communicated different policy responses addressing the potential economic damages in the G-7 countries and 24 emerging market economies (EMEs). The article also illustrates the lockdown and regulatory implications and dynamic economic interventions mandated by the governments, monetary authorities, and central banks. The study demonstrates the potential impact of fiscal, monetary, and macro-financial policy measures on the economic losses caused by regulatory and quarantine measures. Monetary authorities and central banks are lowering the policy rates like repurchase agreement rate (repo), reverse repo, cash reserve requirement (CRR) to ease the liquidity supplies to the economy. Central banks also offered credit facilities to cater to the demand for loans and advances. The study finds that G-7 economies and emerging market economies have implemented a comprehensive fast-track fiscal, monetary, and macro-financial policy to counteract the pandemic’s negative economic consequences. The policy measures include the fiscal stimulus package, direct spending, loans, and credit facilities, refinancing schemes, swap agreement, discount loan window, tax cut on credit, short term loan extension, bridge finance, policy rate cuts, bond purchase, SMEs financing. These policy measures, if implemented successfully, are predicted to minimize the impact of the crisis and to stabilize the economies.