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Monetary policy, uncertainty and COVID-19

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  • Pinshi, Christian P.

Abstract

The COVID-19 pandemic is influencing the management of monetary policy in its role as regulator of aggregate demand and guarantor of macroeconomic stability. We use a Bayesian VAR framework (BVAR) to provide an analysis of the COVID-19 uncertainty shock on the economy and monetary policy response. This analysis shows important conclusions. The uncertainty effect of COVID-19 hits unprecedented aggregate demand and the economy. In addition, it undermines monetary policy action to soften this fall in aggregate demand and curb inflation impacted by the exchange rate effect. We suggest a development of unconventional devices for a gradual recovery of the economy.

Suggested Citation

  • Pinshi, Christian P., 2020. "Monetary policy, uncertainty and COVID-19," MPRA Paper 100836, University Library of Munich, Germany, revised 27 May 2020.
  • Handle: RePEc:pra:mprapa:100836
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christian Pinshi, 2020. "Arithmétique du Pass-through de la COVID-19 sur le Système financier Congolais," Working Papers hal-02897385, HAL.
    2. PINSHI, Christian P., 2022. "A Note on the Natural Rate of Dollarization: Mathematical Approximation of Limits," MPRA Paper 111671, University Library of Munich, Germany.
    3. PINSHI, Christian P., 2023. "Claims, Deposits and Financial Conditions in DR Congo: Impact of COVID-19 on the Financial System," MPRA Paper 117381, University Library of Munich, Germany.
    4. Deimantė Teresienė & Greta Keliuotytė-Staniulėnienė & Rasa Kanapickienė, 2021. "Sustainable Economic Growth Support through Credit Transmission Channel and Financial Stability: In the Context of the COVID-19 Pandemic," Sustainability, MDPI, vol. 13(5), pages 1-34, March.
    5. Müller, Fernanda Maria & Santos, Samuel Solgon & Righi, Marcelo Brutti, 2023. "A description of the COVID-19 outbreak role in financial risk forecasting," The North American Journal of Economics and Finance, Elsevier, vol. 66(C).
    6. PINSHI, Christian P., 2020. "Préserver l’Économie à l’Ere de la COVID-19 : Une Pensée Optimale à la Fujita [Safeguarding the Economy in the Age of COVID-19: A Fujita-style Optimal Thinking]," MPRA Paper 105107, University Library of Munich, Germany, revised Jul 2020.
    7. Trung Duc Nguyen & Anh Hoang Le & Eleftherios I. Thalassinos & Lanh Kim Trieu, 2022. "The Impact of the COVID-19 Pandemic on Economic Growth and Monetary Policy: An Analysis from the DSGE Model in Vietnam," Economies, MDPI, vol. 10(7), pages 1-19, July.
    8. Huan Huu Nguyen & Thanh Phuc Nguyen & Anh Nguyen Tram Tran, 2022. "Impacts of monetary policy transmission on bank performance and risk in the Vietnamese market: Does the Covid-19 pandemic matter?," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2094591-209, December.
    9. Ben salem, salha & slama, ines, 2021. "Modeling the impact of Coronavirus uncertainty on bank system vulnerability and monetary policy conduct," MPRA Paper 107391, University Library of Munich, Germany.
    10. Sadananda Prusty & Anubha & Saurabh Gupta, 2021. "On the Road to Recovery: The Role of Post-Lockdown Stimulus Package," FIIB Business Review, , vol. 11(2), pages 206-224, June.
    11. MALATA, Alain K. & PINSHI, Christian P., 2020. "Système financier et COVID-19 : Un examen de l’impact en RDC [Financial system and COVID-19: A review of the impact in the DRC]," MPRA Paper 107772, University Library of Munich, Germany.
    12. Chevaughn van der Westhuizen & Renee van Eyden & Goodness C. Aye, 2023. "Monetary Policy Effectiveness in the Face of Uncertainty: The Real Macroeconomic Impact of a Monetary Policy Shock in South Africa during High and Low Uncertainty States," Working Papers 202331, University of Pretoria, Department of Economics.
    13. Nguyen, Hoai Thi Thanh & Tram, Huong Thi Xuan & Nguyen, Linh Thi Thuy, 2023. "Interest rates and systemic risk:Evidence from the Vietnamese economy," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    14. Sinem Koçak & Özge Barış-Tüzemen, 2022. "Impact of the COVID-19 on foreign direct investment inflows in emerging economies: evidence from panel quantile regression," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.
    15. Linh Tu Ho & Christopher Gan, 2021. "Foreign Direct Investment and World Pandemic Uncertainty Index: Do Health Pandemics Matter?," JRFM, MDPI, vol. 14(3), pages 1-15, March.
    16. Demiessie, Habtamu, 2020. "COVID-19 Pandemic Uncertainty Shock Impact on Macroeconomic Stability in Ethiopia," MPRA Paper 102625, University Library of Munich, Germany, revised 31 Aug 2020.

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    More about this item

    Keywords

    Monetary policy; Uncertainty; COVID-19; Bayesian VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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