Governments around the world have introduced huge stimulus programs to combat the economic damage caused by COVID-19. These programs allocate billions of dollars in direct payments, tax breaks, business subsidies, and other relief. The size and scale of these programs have caused many governments to run much higher budget deficits than normal. But how are they going to finance these deficits? One way, which some consider anathema to the price-stability mandate of a central bank, has been thrust back into the spotlight as the crisis rages on: sovereign debt monetization.
Continue reading “Monetization of Fiscal Deficits and COVID-19 - A Primer”