Fiscal and Monetary policy to Mitigate the Virus Recession
The coronavirus is choking the world economy. In a few weeks, the highly contagious illness has pushed the world to the edge of a recession more severe than the 2008 financial crisis. The latter was a worldwide economic calamity because millions of individuals lost their savings, homes, jobs, and their businesses because the banks collapsed. Most of the people fear that the outbreak of coronavirus will evolve as a worldwide pandemic. However, whereas the economic disruption caused by the epidemic appears to be sizeable, the lasting impacts of the economy on the economy will be less severe than the 2008 financial crisis under the condition that the authorities act rapidly to contain the economic crisis. When a recession happens and how deep and long it lasts, it relies on the policy. The magnitude and duration of the downturn will depend on various aspects such as the norm of the virus itself, economic interventions, and responses to public health. Given the remarkable nature of the coronavirus crisis, fiscal and monetary policies are working in the absence of a playbook.
Literature Review
Most of the authors have explained the role of fiscal and monetary policies in curbing the financial crisis. However, there is less or limited research on how nations are applying fiscal and monetary policy to mitigate the virus recession. In the United States, the central bank has intervened to guarantee liquidity in the financial sectors. During the start of March 2020, the US central bank decreased the interest rates though this has not caused substantial calming of investors in the capital markets. Calming activities of central banking are confirmed due to the responses of investors operating on financial markets, particularly the capital markets are becoming terrifying, the merit of psychological fear of likely financial losses even though it is not yet acknowledged the size of the losses in the future.