BIS Says Government Debts May Hold Monetary Policy Hostage

The transcript discusses the interplay between monetary and fiscal policy in combating the economic impact of a virus. It highlights the role of central banks in maintaining financial stability and supporting economic growth through proactive measures. The discussion also touches on the impact of central bank actions on asset prices and the real economy, emphasizing the importance of credit channels and market conditions. The ongoing economic impact of the pandemic is addressed, with a focus on the need for patience and continued policy adjustments.

What is the primary limitation of monetary policy in combating the economic consequences of a virus?

• It is not recognized by central banks.

• It has no impact on employment.

• It cannot act independently of fiscal policy.

• It can only address inflation.

What is one of the main contributions of central banks during the crisis?

• Increasing taxes

• Reducing government debt

• Boosting asset prices

• Getting the credit channel working again

How have central banks supported firms and households during the crisis?

• By cutting public spending

• By increasing inflation targets

• By providing credit programs and working with governments

• By reducing interest rates to zero

What is a concern regarding asset prices during the pandemic?

• They are misaligned and show signs of exuberance.

• They are undervalued compared to the real economy.

• They are perfectly aligned with the real economy.

• They are unaffected by central bank actions.

What is a key factor in determining the reopening of economies during the pandemic?

• The stock market performance

• The inflation rate

• The control of the virus

• The level of government debt