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

In: Economic Challenges for Europe After the Pandemic

Author

Listed:
  • Giuseppe Ferrero

    (Banca d’Italia)

  • Massimiliano Pisani

    (Banca d’Italia)

  • Martino Tasso

    (Banca d’Italia)

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.

Suggested Citation

  • Giuseppe Ferrero & Massimiliano Pisani & Martino Tasso, 2022. "Policy Mix During a Pandemic Crisis: A Review of the Debate on Monetary and Fiscal Responses and the Legacy for the Future," Springer Proceedings in Business and Economics, in: Luigi Paganetto (ed.), Economic Challenges for Europe After the Pandemic, pages 267-320, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-10302-5_11
    DOI: 10.1007/978-3-031-10302-5_11
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    Cited by:

    1. d'Aspremont, Alexandre & Ben Arous, Simon & Bricongne, Jean-Charles & Lietti, Benjamin & Meunier, Baptiste, 2025. "Satellites turn “concrete”: Tracking cement with satellite data and neural networks," Journal of Econometrics, Elsevier, vol. 249(PC).
    2. Stefania De Mitri & Antonio De Socio & Valentina Nigro & Sabrina Pastorelli, 2021. "Financial support measures and credit to firms during the pandemic," Questioni di Economia e Finanza (Occasional Papers) 665, Bank of Italy, Economic Research and International Relations Area.
    3. Riccardo Borgoni & Matteo Denova & Paolo Maranzano & Caterina Morelli, 2023. "Assessing geographical differences of the COVID-19 impact on fuel consumption: the case of Italy," Letters in Spatial and Resource Sciences, Springer, vol. 16(1), pages 1-27, December.

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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F01 - International Economics - - General - - - Global Outlook

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