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12 posts from October 2020

October 02, 2020

Should Emerging Economies Embrace Quantitative Easing during the Pandemic?



LSE_2020_credible-central-banks_benigno_460

Emerging economies are fighting COVID-19 and the economic sudden stop imposed by lockdown policies. Even before COVID-19 took root in emerging economies, however, investors had already started to flee these markets–to a much greater extent than they had at the onset of the 2008 global financial crisis (IMF, 2020; World Bank, 2020). Such sudden stops in capital flows can cause significant drops in economic activity, with recoveries that can take several years to complete (Benigno et al., 2020). Unfortunately, austerity and currency depreciations as enacted during the global financial crisis will not mitigate this double whammy of capital outflows and policies to cope with the pandemic. We argue that purchases of local currency government bonds could be a viable option for credible emerging market central banks to support macroeconomic policy goals in these circumstances.

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Posted by Blog Author at 7:00 AM in Central Bank, Exchange Rates, Monetary Policy | Permalink | Comments (0)

October 01, 2020

The Impact of the Corporate Credit Facilities



The Impact of the Corporate Credit Facilities

American companies have raised almost $1 trillion in the U.S. corporate bond market since March. If companies had been unable to refinance those bonds, their inability to repay may have led to an immediate default on all of their obligations, creating a cascade of defaults and layoffs. Based on Compustat data, an inability to access public bond markets could have affected companies employing more than 16 million people. In this post, we document the impact of the Primary Market and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) on bond market functioning, summarizing a detailed evaluation described in a new working paper. We also describe the impact that a collapse of corporate bond markets could have had on employment and investment.

Continue reading "The Impact of the Corporate Credit Facilities" »

Posted by Blog Author at 7:00 AM in Financial Institutions, Financial Markets, Pandemic | Permalink | Comments (2)

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