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ARTICLE COMMENTARY| MAY 20 2021 Central Banking in Pandemic Times Collections: Special Collection: Global Political Economy of COVID-19 , Section: Political Economy, Markets, and Institutions Cornel Ban 1.cba.ioa@cbs.dk Global Perspectives (2021) 2 (1): 24188. https://doi.org/10.1525/gp.2021.24188 Article history Share Icon Share Tools Icon Tools Search Site The sense of extreme disruption brought by Covid-19 led to the fast adoption of unprecedented containment policies. Central banks played a key role in this regard by adopting bold and unprecedented forms of financial stabilization as well as support for government debt in the bond markets. The overall effect has been the blurring of the boundary between monetary and fiscal policy, a key pillar of the “neoliberal” era. Furthermore, the Fed acted as a de facto lender of last resort in dollars of the global financial system, thus playing a global stabilization role even as the Trump administration worked to weaken traditional US ties to global economic governance.
African Governance and Development Institute WP/21/076, 2021
This study explores the responses to the COVID-19 pandemic by the Bank of Central African States (BEAC), which is the central bank for countries in the Central African Economic and Monetary Community (CEMAC), that is, Cameroon, Chad, Gabon, Equatorial Guinea, Central African Republic, and the Republic of Congo. While hitherto, BEAC had fundamentally focused on fighting inflation and promoting monetary integration and financial stability in its member states, the COVID-19 pandemic, among other factors, has motivated it to also shift its policies towards targeted credit programmes and more economic growth. This study sheds light on four core aspects: (i) the socioeconomic context of the CEMAC region prior to the COVID-19 pandemic, (ii) BEAC as a lender of last resort, (iii) historical, contemporary, and future insights surrounding targeted credit programmes, and (iv), suggestions for the path forward in terms of reforms, with emphasis on inclusive growth and monitoring economic development at the regional level.
Finance & Economics Review, 2022
In this paper, we take a look at some of the measures taken by the central bank of the United States viz. the Federal Reserve System, to help businesses, both small and large, to weather the unprecedented economic challenges faced by managers and owners of businesses to survive through the crisis of shutdowns, lost sales, unemployment, and illness. One such step taken by the Federal Reserve was to lower the discount rate, the rate at which Federal Reserve gives loans (Discounts and Advances) to U.S. financial institutions. It may be taken as a standard response to economic slowdowns by central banks around the globe, but Federal Reserve's action has more significant effects than any other central bank. While there is no "one size fits all" economic measure that works in all countries in the wake of the pandemic, we believe that knowing and discussing what one central bank did – can lead to bankers, academics, politicians, business managers and owners from different co...
European Yearbook of International Economic Law 2011, 2010
Journal of Central Banking Theory and Practice
Faced with COVID-19 crisis, central banks have once again become one of the key players in the economies. The aim of this article is to analyse the actions of Central and Eastern European central banks within all their roles (monetary policy, micro-and macroprudential policy, deposit guaranteeing and resolution) during the first coronavirus wave. The analysis shows that they were active in various fields, not only those that were traditionally always assigned to central banks (i.e. monetary policy, although this was the major field of activity). Scope of the intervention naturally depended on the shape of the national financial safety net. At the same time, the use of monetary policy tools depended on the adopted monetary policy strategy. Practice of central banks’ actions shows that central banks with a wide range of monetary tools reacted later. It seems that the scope and intensity of the use of monetary policy tools was not influenced by the general role of the central bank in t...
International Journal of Management Studies and Social Science Research, 2022
Edward Elgar Publishing eBooks, 2023
2020
The COVID-19 pandemic has caused the postponement of the strategic reviews that major central banks were planning to use to redraw their policies and move toward a “new normal” that incorporated the lessons of their unconventional reactions to the Great Financial Crisis. Subsequently, these new exceptional times require new extraordinary measures. The current challenge is to design the best monetary policy reactions to the pandemic that consider the main reasons for the postponed reviews. A three-phase strategy is proposed that emphasizes monetary, prudential, and fiscal policies, and the crucial role of international coordination and the Group of Twenty (G20).
Handbook of Regulatory Authorities (Edward Elgar), 2022
The global diffusion of the central bank independence template since the 1990s insulated central bankers from political pressures and narrowed down their regulatory objectives to price stability. Even though central bankers enjoy a high level of autonomy under this template, they are not immune to reputational threats and policy failures. This chapter exposes how central banks can be analysed as independent regulatory agencies and how agency theories shed light on the tensions underlying the delegation of competences. First, we present how different academic streams, including agency theories, have analysed the inception and developments pertaining to the CBI template. Then, we show how the reactions of central banks to the 2007-2009 Global Financial Crisis induced new academic debates and research agendas. The conclusion briefly exposes how central banks' reaction to the Covid-19 pandemic strengthen the relevance of these new research agendas.
This report discusses the overall instabilities inherent in the current global financial system in general, and the system’s performance in reaction to the COVID-19 pandemic in particular. It explains why the financial crisis induced by the COVID-19 outbreak was not an unpredictable black swan event in an otherwise stable system, and demonstrates that where the financial system is concerned, instability is the rule rather than the exception. The report holds that the financial system was already in crisis mode when the pandemic hit. For the past 20 years, the shadow banking system has been growing at a steady pace. Short-term repo market funding has been greatly accelerating. The crisis susceptibility of today’s financial system can mainly be explained by the fact that the stability of this financial system is strongly grafted on the stabilization of the shadow banking system, and that although the shadow banking system is inherently prone to crisis, it nevertheless remains largely unregulated. Moreover, since the last global financial crisis, new unsecure credit and debt structures have been building up. Private debt burdens have been soaring. High-frequency trading and algorithmic trading have become increasingly important. Exchange traded funds (ETFs) and portfolio trading have experienced rapid growth. The eurocrisis remains unsolved and the structural and politico-economic problems within the eurozone persist. Hence, downside risks to financial stability were already prevalent and conducive to further instability before the crisis began. In a crisis situation, existing risks tend to become even more pronounced. The COVID-19 crisis has once again demonstrated that financial markets in their current form do not act as a firewall to avert economic downturns. Central banks have had to step in to prevent large-scale insolvency by providing credit directly to large employers as well as to small and medium-sized businesses to enable them to maintain their business operations and retain their employees. More than ever before, the demand and supply of credit, and thus the functioning of financial markets as a whole, are determined by central bank monetary policy. However, even if central bank intervention does manage to stabilize financial markets, that stability will remain highly precarious unless strong and appropriate rules for financial markets are in place and governments complement monetary policy with forceful and comprehensive fiscal policies.
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