 Monetization of Fiscal Deficits and COVID-19: A PrimerGreg Feldberg ()
Journal of Financial Crises, 2020, vol. 2, issue 4, 1-35 Abstract: Monetization--also known as "money-financed fiscal programs" or "money-printing"--occurs when a government finances itself by issuing currency or other non-interest-bearing liabilities, such as bank reserves. It poses real risks--potentially excessive inflation and encroachment on central-bank independence--and some paint it as a relic of a bygone era. The onset of the COVID-19 crisis, however, forced governments to spend heavily to combat the considerable economic and public health impacts. As government deficits climbed, monetization re-entered the conversation as a way to avoid the massive debt burdens that some nations may face. This paper describes how monetization works, provides key historical examples, and examines recent central-bank measures. Based on our definition, much of what many are calling monetization today--in particular, central banks directly buying massive amounts of their own government's bonds--is not necessarily monetization. To our knowledge, no central bank during the COVID-19 crisis took an action that meets our definition or explicitly stated that it was conducting monetization. Keywords: monetization; monetary policy; fiscal policy; monetary finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ysm:ypfsfc:2411 Access Statistics for this article More articles in Journal of Financial Crises from Yale Program on Financial Stability (YPFS) Contact information at EDIRC. |
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