Hi,
Monetary Measures taken by Central Banks to address
Financial Crises (2008) & COVID Crises:-
Financial Crises (2008) and COVID Crises lead the gobal economy
into the phase to recession. Economies of most of the countries has
been hit negatively. To overcome and restore economic condition
back to normal Central Bank of the nation has to take certain
monetary Policies. Some of them are:-
- Reducing Interest Rates of Loan:- Sanction of loan to People of
the country at lower interest rate encourages them to produce more
and more and hence Production in economy will rise and ulimately
Gross Domestic Product (GDP) will increase.
- Purchasing Government Securities :-Purachsing of Governement
Securities act as two sided sword. Firstly, Due to Financial crises
of 2008, the investors who invests in Soverign Securities are
afraid of repayment. By Purchasing Soverign Securities
Central Bank Repays to those investors and at the same time injects
money in the market which leads to increase in money supply in the
economy which ulimately leads to increase in expenditure of
household. Increasing expenditure of household will increase
production in the economy.
- Reducing Reserves Ratios:- Central Bank requires Commercial
banks to to keep a certain percentage of Deposit with central Bank
and certain Percentage of Deposit with themselves from which amount
a commercial bank will not able to lend money. If central bank
reduces Reserves Ratios then the reaserve which Commercial bank
will have to keep aside with Central bank will reduced and bank
will able to lend more money which leads to increase in money flow
in the market which increases production and ultimately Economy had
recovered from crises.
- Interest on Loan Waiver:- Mostly in COVID situation, certain
countries like India, had waived off interest on loan to be paid by
borrowers to give them Direct financial assistance. This has done
because due to COVID, borrowers bsuiness had been effected
adversly, so they are not in a position to repay interest on loans.
So, governement has waived off interest and Interest on interest to
give them direct financial assistance.
Thanks !