Quasi-fiscal policies in times of crisis: A high-frequency data analysis

This paper investigates the macroeconomic and distributional impact of quasi-fiscal (QF) policies implemented by the Federal Reserve during the Covid-19 crisis. Using high-frequency, county-level data on consumption and employment, we distinguish between purely monetary measures — such as interest rate cuts and asset purchases — and quasi-fiscal tools like credit facilities and liquidity programs. We show that QF interventions generated faster and stronger effects on both consumption and employment compared to conventional tools, with responses materializing within two to three weeks of announcements. Moreover, we find that these effects were not evenly distributed across US counties: consumption inequality increased in the short term, with wealthier counties experiencing larger gains. We explore the underlying mechanisms and show that both asset-price-related wealth effects and credit availability through lending facilities played key roles, especially in regions with higher capital income and greater access to loans. Our findings suggest that while QF policies can act as effective stabilizers during crises, they may also exacerbate spatial inequalities in the short run, raising new questions for central bank accountability and policy design.