Fiscal and Monetary Collaboration: So Complex, It’s Really Very Simple

Pine Bridge
By June 4, 2020 13:12

Fiscal and Monetary Collaboration: So Complex, It’s Really Very Simple

To help buffer their economies from the damage caused by Covid-19, most countries have launched both fiscal and monetary policy thrusts. While driven by common objectives, the optics of these moves – with fiscal authorities issuing massive amounts of debt that independent central banks then buy up – may appear oddly circular. Or perhaps fiscal and monetary authorities should be thought of simply as fellow travelers. Either way, such collaborative execution is fraught with imponderables. On the fiscal side, the impact of greater government spending is replete with unknowns. For a start, it’s difficult to assess the size or timing of debt issuance even after a fiscal package has been announced. These packages are layered on top of a base level of expenditures which itself varies. In Europe, for example, government spending in the form of automatic stabilizers and credit enhancements is embedded in existing arrangements, which may or may not be triggered. 

Pine Bridge
By June 4, 2020 13:12

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