Initial monetary policy response to the COVID-19 pandemic in inflation targeting economies

Joanna Niedźwiedzińska
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Joanna Niedźwiedzińska: Narodowy Bank Polski

No 335, NBP Working Papers from Narodowy Bank Polski

Abstract: The monetary policy response to COVID-19 was, in many ways, exceptional. This paper investigates some aspects of this exceptionality among 28 inflation targeters. Evidently, the reviewed central banks assessed the pandemic to be a clear-cut case for loosening by promptly announcing expansionary decisions, often at extraordinary meetings, using a possibly broad set of measures, with not much hesitation before reaching for unconventional ones. One of the key aspects of the analysed monetary policy response was also how quickly the authorities reacted to the shock. It turned out that, on average, advanced economies announced their initial policy actions within a month, whereas emerging market economies were twice as fast. This difference could be, however, to a great extent, explained by the timing of registering the first COVID-19 cases in a country, having room for policy manoeuvre with respect to nonstandard measures and being in need of liquidity provisions with a less deep financial system.

Keywords: Monetary Policy; Central Banking; Policy Design. (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 E61 (search for similar items in EconPapers)
Pages: 44
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:335

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