Does the Covid-19 Shock Matter for Monetary Policy?

Nicholas Apergis ()

Economic Issues Journal Articles, 2021, vol. 26, issue 1, 45-55

Abstract: This paper explores for the first time how the Covid-19 shock affects a monetary policy rule after it has been separated from other potential structural shocks. The novelty of this empirical analysis will illustrate explicitly why monetary authorities can respond immediately to the pandemic crisis by cutting policy rates. The findings show that central banks behave differently to different types of shock, with the long-run responses of policy rates to inflation meeting the Taylor principle for the Covid-19 shock. The results are robust to alternative modelling specifications. Monetary policy rules that explicitly consider the pandemic crisis can play a vital role in limiting the economic and financial damage caused by efforts to contain Covid-19 and, in that way, can help support the strict public-health measures that are needed to save lives and set the stage for economic recovery.

Keywords: Covid-19; monetary policy rule; OECD countries (search for similar items in EconPapers)
JEL-codes: C33 E52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.economicissues.org.uk/Files/2021/EI_March2021_apergis.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eis:articl:121apergis

Access Statistics for this article

More articles in Economic Issues Journal Articles from Economic Issues Contact information at EDIRC.
Bibliographic data for series maintained by Dan Wheatley ().