Diversity of monetary regimes and reactions to the COVID-19 pandemic crisis in the Balkan Countries

In the Balkan countries (Bulgaria, Romania and Serbia) the coronavirus pandemic has had serious economic and social repercussions. While in Bulgaria there are a number of formal, legal constraints to pursuing expansionary fiscal and monetary policies, as well as those stemming from the participation of the Bulgarian lev in the exchange rate mechanism 2 and the EU Banking Union, in Romania and Serbia the government and the central bank dispose of more policy tools and opportunities to react to crises. This is evidenced by the applied monetary easing strategies, including quantitative easing as well as other unconventional monetary policy and liquidity measures during the pandemic. In this regard, the aim of the chapter is to demonstrate to what extent the type of monetary regime determines the scope and nature of reactions in the event of a shock and crisis associated with systemic uncertainty and the possibilities for a long-term recovery in the three Balkan states. The first section presents a brief presentation of the different monetary regimes applied in the Balkan countries and an explanation of their relation and/or dependence on the EU and in particular on the European Central Bank's monetary policy. The second part explains the fiscal, monetary and macro-prudential policy measures implemented during the pandemic. The third section explores the impact of monetary policies on the price stability and economic recovery. We draw conclusions on the role of monetary regimes in macroeconomic stabilisation.