The Federal Reserve's response to the COVID-19 contraction: An initial appraisal

We provide an initial assessment of the Federal Reserve's policy response to the COVID-19 contraction. We briefly review the historical episode and consider the standard textbook treatment of a pandemic on the macroeconomy. We summarize and then evaluate the Fed's monetary and emergency le...

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Bibliographic Details
Published in:Southern Economic Journal 2021-04, Vol.87 (4), p.1152-1174
Main Authors: Cachanosky, Nicolás, Cutsinger, Bryan P., Hogan, Thomas L., Luther, William J., Salter, Alexander W.
Format: Article
Language:English
Subjects:
COVID-19
credit allocation
Credit policy
Federal Reserve
Fiscal policy
lending facilities
monetary policy
Pandemics
Symposium
Symposium: The Political Economy of the COVID-19 Pandemic
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Summary:We provide an initial assessment of the Federal Reserve's policy response to the COVID-19 contraction. We briefly review the historical episode and consider the standard textbook treatment of a pandemic on the macroeconomy. We summarize and then evaluate the Fed's monetary and emergency lending policies through the end of 2020. We credit the Fed with promoting monetary stability while maintaining that it could have done more. We argue that the Fed could have achieved stability without employing its emergency lending facilities. Although some facilities likely helped to promote general liquidity, others were primarily intended to allocate credit, which blurs the line between monetary and fiscal policy. These credit allocation facilities were unwarranted and unwise.
ISSN:0038-4038
2325-8012
DOI:10.1002/soej.12498