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Initial monetary policy response to the COVID-19 pandemic in inflation targeting economies

Author

Listed:
  • Joanna Niedźwiedzińska

    (Narodowy Bank Polski)

Abstract

The monetary policy response to COVID-19 was, in many ways, exceptional. This paper investigates some aspects of this exceptionality among 28 inflation targeters. Evidently, the reviewed central banks assessed the pandemic to be a clear-cut case for loosening by promptly announcing expansionary decisions, often at extraordinary meetings, using a possibly broad set of measures, with not much hesitation before reaching for unconventional ones. One of the key aspects of the analysed monetary policy response was also how quickly the authorities reacted to the shock. It turned out that, on average, advanced economies announced their initial policy actions within a month, whereas emerging market economies were twice as fast. This difference could be, however, to a great extent, explained by the timing of registering the first COVID-19 cases in a country, having room for policy manoeuvre with respect to nonstandard measures and being in need of liquidity provisions with a less deep financial system.

Suggested Citation

  • Joanna Niedźwiedzińska, 2020. "Initial monetary policy response to the COVID-19 pandemic in inflation targeting economies," NBP Working Papers 335, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:335
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    References listed on IDEAS

    as
    1. Mark H. Willes, 1967. "The Inside Lags Of Monetary Policy: 1952–1960," Journal of Finance, American Finance Association, vol. 22(4), pages 591-593, December.
    2. Michael Woodford, 2003. "Optimal Interest-Rate Smoothing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(4), pages 861-886.
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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