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Modeling the impact of Coronavirus uncertainty on bank system vulnerability and monetary policy conduct

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  • Ben salem, salha
  • slama, ines

Abstract

The uncertainty of COVID-19 seriously disrupts the world through various macroeconomic and financial channels. For Tunisia, the Pandemic came when the economy was confronting persevering macroeconomic imbalances, regardless of new progress with policy and reform implementation. This context hits the Tunisian economy, especially as it has not yet exited from the negative effect of the 2011 revolution. This paper aims to analyze how the coronavirus uncertainty shock affects the monetary policy's conduct and the banking system's vulnerability in Tunisia. Using the structural VAR model, we find that the adaptation of an easing credit' policy by the bank can attenuate the uncertainty of COVID-19 uncertainty in a short period but it causes negative consequences on the Tunisian economy in a subsequent period. The empirical results show also that uncertainty decreases the ability of the central bank to improve economic activity and control inflation.

Suggested Citation

  • Ben salem, salha & slama, ines, 2021. "Modeling the impact of Coronavirus uncertainty on bank system vulnerability and monetary policy conduct," MPRA Paper 107391, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107391
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    COVID-19 uncertainty; bank vulnerability; monetary policy conduct; economic implication;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G1 - Financial Economics - - General Financial Markets

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