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Why was the ECB’s reaction to Covid-19 crisis faster than after the 2008 financial crash?

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  • Morelli, Pierluigi
  • Seghezza, Elena

Abstract

At the time of the financial crises of 2008 and 2010–11 the ECB reacted with an extremely cautious gradualism. This behaviour is attributable to the slower learning process that characterizes a central bank of a monetary union composed of countries with fiscal sovereignty compared to other central banks. In sharp contrast to the previous crises, the ECB reacted promptly to the COVID-19 crisis. This change in behaviour is explained here by the learning process about the effects on monetary policy transmission of the increased financial fragmentation of the eurozone over the last decade.

Suggested Citation

  • Morelli, Pierluigi & Seghezza, Elena, 2021. "Why was the ECB’s reaction to Covid-19 crisis faster than after the 2008 financial crash?," Journal of Policy Modeling, Elsevier, vol. 43(1), pages 1-14.
    • Handle: RePEc:eee:jpolmo:v:43:y:2021:i:1:p:1-14
    DOI: 10.1016/j.jpolmod.2020.12.002
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    Cited by:

    1. CRISTE, Adina, 2022. "Central Banks Contributions In Managing The Pandemic Crisis. A Summary At The Eu Countries Level," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 26(3), pages 76-93, September.
    2. Goel, Rajeev K. & Saunoris, James W. & Goel, Srishti S., 2021. "Supply chain performance and economic growth: The impact of COVID-19 disruptions," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 298-316.
    3. Felix Roth & Lars Jonung & Aisada Most, 2024. "COVID-19 and public support for the Euro," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 61-86, February.
    4. Massimo Amato & Everardo Belloni & Paolo Falbo & Lucio Gobbi, 2021. "Europe, public debts, and safe assets: the scope for a European Debt Agency," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 823-861, October.
    5. Giammetti, Raffaele & Papi, Luca & Teobaldelli, Désirée & Ticchi, Davide, 2022. "The optimality of age-based lockdown policies," Journal of Policy Modeling, Elsevier, vol. 44(3), pages 722-738.
    6. Pierpaolo Benigno & Paolo Canofari & Giovanni Di Bartolomeo & Marcello Messori, 2021. "The ECB's policy measures during the COVID-19 crisis," Working Papers in Public Economics 207, University of Rome La Sapienza, Department of Economics and Law.

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    More about this item

    Keywords

    Covid-19 crisis; ECB monetary policy; Financial fragmentation;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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