Liquidity Steps: Policy Actions Taken by Central Banks During Coronavirus Pandemic

Abstract

AbstractThis article, it is aimed to examine the primary actions taken by central banks to support the sectors, businesses, and individuals in difficulty during the epidemic process. In line with this purpose, we compiled actions of the US Federal Reserve (FED), the European Central Bank (ECB), the Bank of Japan (BoJ), Bank of China (PBoC), and the Bank of England (BoE) as leading central banks, as well as many countries including Turkey. While the main framework of the moves made in this process is to keep the liquidity abundant by creating a low-interest environment, it can be summarized as providing the banks with the necessary flexibility to open credit channels and support the tradesmen and individuals. Quantitative easing was one of the main policies applied during the epidemic. In addition to this, facilitating the access of countries to dollars and euros through swap agreements was among the policies implemented. Looking at all these steps taken by the central banks from January to mid-June, it was seen that the moves stimulated the flow of credit towards the real economy and the employment market, while on the financial side, it had an effect on reducing the volatility in the markets. While it is agreed that the problem in the liquidity flow has been eliminated and the pressure on the supply of dollars has been alleviated through the swap channel, it is considered that the extent to which the measures and incentives will weaken the financial side will depend on how to further the outbreak will last.KeywordsCentral banksEpidemicUS Federal Reserve FEDEuropean Central Bank ECBBank of Japan (BoJ)Bank of China (PBoC)Bank of England (BoE)LiquidityEconomy