Examining Monetary Policy Measures and Their Impacts During and After the COVID Era: OECD Perspectives

Abstract

Governments worldwide implemented various fiscal and monetary measures to address the adverse impacts of COVID-19 on their economies. The paper aims to examine the changes in the monetary policy measures due to COVID-19 and their impact on macroeconomic variables. To explore this relationship, this study utilizes fortnightly data from 2020 to 2023 on the OECD (Organisation for Economic Co-operation and Development) countries. The study employs a Panel Autoregressive Distributed Lag (ARDL) model to analyze the effects of the monetary policy responses of the OECD governments, and the obtained results reveal that within OECD countries, the prevailing trend of lower interest rate policies emerged during the pandemic. This policy approach yielded a dual effect: lowering both output growth and inflation rates, while concurrently exacerbating unemployment rates throughout the COVID-19 period. Consequently, it is clear that monetary policies have played a pivotal role in facilitating the recovery from a profound economic shock such as the COVID-19 pandemic. Given the significant economic repercussions of a pandemic and the crucial role that monetary policy plays in sustaining economic stability, the apparent lack of attention underscores the urgent necessity for additional discourse on this vital subject.