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ECB and Fed Monetary Policy Measures against the Economic Effects of the Coronavirus Pandemic Have Little Effect

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  • Kerstin Bernoth
  • Geraldine Dany-Knedlik
  • Anna Gibert

Abstract

To cushion the economic effects of the coronavirus pandemic, central banks have taken far-reaching monetary policy measures. The US Federal Reserve has lowered its interest rates and, like the European Central Bank, has expanded its bond purchase programs. However, it is questionable whether these measures are having the desired effect of calming the markets and supporting the real economy. It is true that the macroeconomic effects cannot yet be quantified, but initial indications of their effectiveness can be seen in the short-term reactions of stock prices and bond yields. The following article shows how interest rates and prices have reacted directly to the central bank announcements and what conclusions can be drawn from this for future measures

Suggested Citation

  • Kerstin Bernoth & Geraldine Dany-Knedlik & Anna Gibert, 2020. "ECB and Fed Monetary Policy Measures against the Economic Effects of the Coronavirus Pandemic Have Little Effect," DIW focus 3, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwfoc:3en
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