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Macro-Financial Stability in the COVID-19 Crisis: Some Reflections
Author:
Mr. Tobias Adrian
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https://orcid.org/0000-0001-9379-9592
,
Mr. Fabio M Natalucci
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https://orcid.org/0000-0002-1621-8819
, and
Mahvash S Qureshi
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 251
Language:
English
Publication Date:
16 Dec 2022
DOI:
https://doi.org/10.5089/9798400223532.001
ISBN:
9798400223532
ISSN:
1018-5941
Pages:
27
Keywords:
COVID-19 pandemic crisis; monetary policy; financial stability; emerging markets; central bank asset; purchase program; monetary policy support; market liquidity; asset purchase; COVID-19; Inflation; Global financial crisis of 2008-2009; Capital flows; Financial sector stability; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The global financial system has shown remarkable resilience during the COVID-19 pandemic, despite a sharp decline in economic activity and the initial financial market upheaval in March 2020. This paper takes stock of the factors that contributed to this resilience, focusing on the role of monetary and financial policies. In response to the pandemic-induced crisis, major central banks acted swiftly and decisively, cutting policy rates, introducing new asset purchase programs, providing liquidity support for the banking system, and creating several emergency facilities to sustain the flow of credit to the real economy. Several emerging market central banks also deployed asset purchase programs for the first time. While the pandemic crisis has underscored the importance of policies in preventing calamitous financial outcomes, it has also brought to the fore some unintended consequences of policy actions—in particular, of providing prolonged monetary policy support and applying regulation to specific segments of the financial system rather than taking a broader approach—that could undermine financial stability in the future.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 251