A global database on central banks' monetary responses to Covid-19

Summary

Focus

The Covid-19 pandemic has been an unprecedented health shock that has simultaneously affected demand, supply and financial conditions around the globe. Central banks have reacted strongly, using a range of different measures to shore up financial markets and mitigate the adverse economic impact of the pandemic. A key policy question going forward will be how promptly, strongly and effectively different central banks responded to the crisis.

Contribution

We present a new database that provides details of central banks' monetary policy responses to Covid-19. By collecting these on a comparable basis across 39 economies, we can help researchers evaluate different central banks' policies. Our starting point is central banks' public announcements of monetary policy measures. We classify these into different types of tools: interest rate measures, reserve policies, lending operations, asset purchase programmes and foreign exchange operations. We provide further details relevant to each type of tool, such as the maturity and whether the instrument was new to the central bank or not. We also provide a dashboard to visualise the data graphically.

Findings

To illustrate the usefulness of the database, we compare how advanced economy and emerging market central banks have reacted to the crisis. Many of the tools deployed were similar across the two groups. However, policy actions in advanced economies involved mainly lending operations or asset purchases, and generally required extending measures that had already been previously employed. Emerging market central banks also resorted extensively to lending operations but their recourse to other policies differed. They made more use of interest rate, foreign exchange and reserve policies, and less of asset purchases. Moreover, many emerging market central banks ventured into asset purchase policies for the first time during the pandemic. Another major difference related to foreign exchange operations. With the exception of extending swap lines, advanced economy central banks generally played only a limited role in foreign exchange markets. By contrast, emerging market central banks intervened more heavily, often relying on derivatives to influence exchange rates.

Abstract

The Covid-19 pandemic has been a global shock of unprecedented size that has hit most countries around the world. Central banks have responded quickly, on a massive scale. We present a novel database that provides information on central banks' responses to Covid-19 in 39 economies, including both advanced and emerging market economies. Monetary policy announcements are listed and classified under five types of tools: interest rate measures, reserve policies, lending operations, asset purchase programmes and foreign exchange operations. Within each category, the database provides additional information such as maturity, eligible counterparties, types of assets and the availability of fiscal backup. It also indicates whether the policy tool was newly introduced or had been previously deployed. The database has a companion dashboard to visualise the data graphically.

JEL codes: E43, E44, E52, E58, G01

Keywords: Covid-19 crisis, monetary policy, lending operations, asset purchase programmes, FX policy, reserve policy