COVID-19 Pandemic: World Central Banks’ Reactions to Economic Downturn

Abstract

Measures to mitigate the effects of the COVID 19 pandemic on households and businesses taken by Western governments in 2020 had serious negative consequences for the global economy. There was a widespread fall of production and trade, the closure of enterprises and stagnation of entire industries, sharp increase in unemployment, rise of uncertainty and risks. In an effort to slow the development of economic downturn the central banks and the Treasuries had taken wide range of monetary measures. Some of which were the continuation of the programs initiated during the period of global financial crisis of 2007–2009 and adapted to the current economic situation and the others represented new programs for the purchase of financial assets and granting credit facilities to enterprises and households. These actions, aimed primarily at the issue of additional quantities of money into the circulation, were distinguished by very large scale and high speed of decision-making. The author’s analysis led to a conclusion that the monetary policy during COVID 19 pandemic helped to stabilize financial markets, preserved the activities of a part of small and medium-sized enterprises and improved employment in the labor market. At the same time, massive “quantitative easing” operations increased the risk of financial instability and the likelihood of emerging of difficult-to-control inflationary spiral in Western economies. As to the achievement of strategic goals of monetary policy in the macroeconomic sphere, the success was much less noticeable due to the influence of many nonmonetary factors on the level of employment and the rate of economic growth.