Policy Mix During a Pandemic Crisis: A Review of the Debate on Monetary and Fiscal Responses and the Legacy for the Future

Giuseppe Ferrero, Massimiliano Pisani and Martino Tasso

A chapter in Economic Challenges for Europe After the Pandemic, 2022, pp 267-320 from Springer

Abstract: Abstract We review the debate on the monetary and fiscal policy measures that were adopted in response to the pandemic shock in advanced economies, as well as others that could be taken in the near future, once the health emergency is over. The pandemic is an exceptional global health shock, which has negatively affected the income, liquidity, and financial conditions of households and firms worldwide. Policy responses adopted in advanced economies in 2020—based on extraordinary large-scale, swift, targeted monetary and fiscal measures—were appropriate to sustain liquidity, income, and aggregate demand and, thus, helped to avert a devastating financial crisis. Once the health emergency is over, the legacies of the shock will be a recovery of uncertain strength and timing, a low interest rate environment, and high corporate and public debts. Support measures should be removed with caution. A cross-country coordinated policy mix based on (i) accommodative monetary policies (if consistent with central bank objectives), (ii) public investments and (iii) a gradual rebalancing of government accounts, could be effective in sustaining a strong global recovery and reduce private and public debt.

Keywords: COVID 19; Secular stagnation; Monetary policy; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E52 E58 E62 F01 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Policy mix during a pandemic crisis: a review of the debate on monetary and fiscal responses and the legacy for the future (2021)
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DOI: 10.1007/978-3-031-10302-5_11

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