COVID-19 and Monetary Policy with Zero Bounds: A Cross-Country Investigation

22 Pages Posted: 11 May 2020 Last revised: 27 Apr 2021

See all articles by HAKAN YILMAZKUDAY

HAKAN YILMAZKUDAY

Florida International University (FIU) - Department of Economics

Date Written: March 28, 2021

Abstract

Using daily data on policy rates from 28 advanced economies and 32 emerging markets, this paper investigates the monetary policy reaction function of central banks during the Coronavirus Disease 2019 (COVID-19) outbreak. The results show that emerging markets or countries without a zero bound on their interest rates were able to reduce interest rates as a reaction to reduced economic activity and to the volatility in their exchange rates, whereas advanced economies or countries with a zero bound on their interest rates were not. Several policy implications follow for countries with a zero bound on their interest rates amid COVID-19.

Keywords: COVID-19, Coronavirus, Monetary Policy, Reaction Function, Google Mobility, Exchange Rate

JEL Classification: E52, E58

Suggested Citation

Yilmazkuday, Hakan, COVID-19 and Monetary Policy with Zero Bounds: A Cross-Country Investigation (March 28, 2021). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3598500 or http://dx.doi.org/10.2139/ssrn.3598500

Hakan Yilmazkuday (Contact Author)

Florida International University (FIU) - Department of Economics ( email )

11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://faculty.fiu.edu/~hyilmazk/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
212
Abstract Views
2,006
rank
180,665
PlumX Metrics