Question

- What policy instruments, if any, the Bank of Canada is using in response to COVID-19? Do you think these are adequate to avoid a recession?

Read the following articles to formulate your idea and discuss the above question:

1. "Bridge to Recovery: The Bank’s COVID-19 Pandemic Response"
2. "Bank of Canada cuts rates in response to COVID-19"
3. "This is what the Bank of Canada has left in its arsenal to fight the coronavirus downturn"

Answer 1

Covid 19 pandemic create huge impact over the global economy. The energy, travel and hospitality and service industries were badly affected in Canada. There are several containment measures were used to uplift the work and production. Wage subsidies, commercial rent assistance and loan programmes are the major programmes imposed by Development Programme of Canada. The major monetary policy taken by Bank of Canada are lowering the overnight rate, speed and magnitude of the rate of cutting, lowering rates attract the demand and laying foundation for recovery measures. Major priority was given to short term funding market. This will help to continue the serving of business and individual. There is a repo operation conducted with wide range of high quality collateral terms for two years. Bank of Canada purchase banker’s acceptance, commercial paper and short term debt from all the provinces. This encourages the market of these securities.
The uncertainty regarding the end of this pandemic creates a fear of loss among the investors, businessman and individual also. The current policies and measures taken by Canadian government were temporary in nature. These measures only exist for short period. There is high level fluctuation of the market prices can be find. There is lack of importance given to the inflation control measures. There is a fear exists about deflation level. Policy makers cannot give any assistance regarding the credibility of this policies.