Central Bank Policy toward the Covid-19 pandemic: Seeking patterns among the most powerful central banks

Abstract

Purpose: The main objective of this chapter is to identify the role of central banks in managing the crisis created by the Covid-19 pandemic. In order to explore this subject, the chapter attempts to identify similarities and differences in the behavior of selected central banks, those most important from the viewpoint of the global economy. Design/methodology/approach: The study encompassed 29 countries, mostly European economies (16) and other economies that bear the impact on the global output. The empirical analysis was based on k-means clustering analysis, which enabled us to identify groups of countries that followed similar solutions in response to the Covid-19 crisis. Findings: The analysis conducted in this chapter indicates the diverse nature of central banks’ policies and, in many cases, to aspecific bias toward an increase in monetary or financial policies. The intensification of the use of the tools of certain policies must be seen from the perspective of the purpose of those policies, but also in the context of the legal or statutory constraints imposed on central banks. Research limitations/implications: An interesting direction of research into the diverse nature of central bank policies will undoubtedly be to seek answers to the question of the effectiveness of these policies in the context of crisis. Such astudy, carried out ex post, may provide astarting point for designing future central bank crisis policy and implementing institutional solutions of anational or even supranational nature. Originality and value: The chapter shed some light on the regulatory and statutory sphere of central banking. We may clearly state that key central banks of the world do not operate within the framework of asingle universal rule and that there simultaneously is no optimal combination of crisis policy tools even for the same crisis. Therefore, when looking for regulatory and legal solutions, we should treat each case individually by designing regulations in away that corresponds to the specific features and conditions prevailing in the given financial and economic system.