Question

Question: Describe various policy measures taken by governments and Central Banks to deal with Corona Pandemic. How effective have been these policy measures, especially monetary and fiscal policies, in reducing the severity of the crisis? Take one or more countries as examples for your study. Provide data and analysis to support your answer.

Direction: Please answer the question in detail. Support your answer with data and references as much as possible. Do not copy and paste. Write in your own words and provide references wherever applicable. Use economic terminologies as much as possible. Write legibly in complete sentences using correct English language. There is no page limit.

Answer 1

Corona Pandemic:

The Corona Virus was announced a pandemic over the globe by the World Health Organization. Because of the overwhelming loss of life which the infection has had, it has gotten obligatory for nations to look inwards and issue lock down measures which confine development and request and flexibly of products with the exception of basic items, for example, proportion, social insurance and so forth have all gone down significantly.

The dread of the administrations across various nations is that it could prompt a worldwide downturn where various individuals will lose their positions and it might prompt a quick decrease in the interest and Gross Domestic Product of the nations may decay generously prompting no development and loss of salary.

To counter this, various government and Fiscal Policy Measures have been taken which with regards to the United States of America is as per the following: -

Fiscal Policies: -

Fiscal strategies are those which are taken by the Federal Reserve which happens to be the Central Bank in the nation. The Monetary Policy applied during this basic stage is that of growing the accessibility of cash in the nation. As more cash is accessible to banks, the final product is that credit gets less expensive and it is simpler for banks to concede advances to the overall population. The interest is made and organizations can extend their business without any difficulty.

Coming up next are a portion of the key measures embraced: -

•Reducing the Federal Funds Rate

The Federal Funds rate is otherwise called the rebate rate. It is the rate at which business banks get advances from the Federal Reserve. This rate is an unmistakable marker for business banks and they change the rates which they charge to individual just as business borrowers in like manner.

An ongoing choice by the Fed was to diminish the Discount rate to an unsurpassed low of 0.25% this presently permits the banks to loan cash much unreservedly and is viewed as a measure to make credit and request simultaneously.

•Purchase of Government Securities.

Another technique followed by the Federal Reserve is to buy back government securities which will take into consideration higher measures of cash promptly accessible with banks for giving out as credit to buyers and the more extensive industry on the loose.

The Federal Reserve vowed to buy as much as "$500 billion in Treasury protections and $200 billion in government-ensured contract sponsored protections". it was accordingly concluded that this buy would be open finished as on 23rd March and the sum may additionally be amended.

These buys lead to free progression of cash in the economy which will bring about interest to get steady, when the economy revives to general society.

• Reducing the Cash Reserve Ratio

The money save proportion is the base level of cash which the business banks must hold at some random purpose of time with the central bank.

Post the 2008 Crisis of land in the business sectors, the Cash Reserve Ratio has been set to 0 levels in the United States implying that the banks have a through and through freedom to part with credit from stores and don't have a compulsory prerequisite to give the equivalent to the Federal Bank. The outcome would be that the accessible credit to the overall population will enormously increment

Financial Policy: -

Financial Policy Measures are taken by the Government in regard of the present emergency, the Fiscal Policy measures attempted are expansionary in presence. Implying that they mean to build the gracefully of cash in the nation.

The administration on its part has profoundly expanded the general human services spending and has guaranteed that jobless individuals get help, while those on work get free paid leaves to diminish the concern of loss of interest in the nation.

The Congress passed 8.3 Billion $ Funding for Corona Virus Preparedness programs that target decreasing the monetary ramifications of the malady in the nation, Further, the administration on a basic level endorsed 2 Trillion Dollar worth of help with the type of direct money moves as much as 1200$ per individual.

Different estimates taken remember a 90 Day unwinding for charge filings and comparative measures on existing understudy advances in which conceded or no intrigue installments can be made.