Overview of Central Banks’ Answers to Economic Stimulus Following Covid-19

Abstract

In this paper we discuss the implications of various economic stimulusmechanisms implemented by the United States and EU central banksto combat the economic downturn caused by the Covid-19 pandemic.The huge increase in both the Federal Reserve’s and European CentralBank’s balance sheets using financial tools has led to a distortionof stock markets and government bonds. In turn, this has led to amonumental increase in MZM (deprecated M3) that may prove to beunsustainable. As such, the central banks’ governance bodies havetaken steps to provide alternatives to fiat money as a means of lastresort.