1.

Abstract: 1
2. Introduction: 1
2.1. Economic policy: 1
2.2. Overview of the pandemic in the United States 3
2.3. Study Objectives 3
3. COVID’s economic impact on the US: 4
3.1. GDP 4
3.2. Labor market 6
3.3. Economic sector 8
4. The response of the US government 11
4.1. Monetary policy 11
Hypothesis 11
Application 12
Evaluation 21
4.2. Fiscal policy 23
Hypothesis 23
Application 24
Evaluation 31
5. Impacts and effectiveness of the response 33
5.1. Effectiveness of monetary policy 33
5.2. Effectiveness of fiscal policy 34
5.3. Economic indicators 36
6. Successes, failures and lessons: 44
6.1. Successes 44
6.2. Failures 48
6.3. Lessons 49
7. References 52
 1

1. Abstract:

The COVID-19 pandemic had negative impacts on various aspects of the U.S.

economy, including GDP growth, the labor market and various economic sectors. In response

to the pandemic, the government enacted a series of expansionary monetary and fiscal

policies. The monetary policies included: maintaining a low policy rate, stabilizing financial

markets and supporting the flow of credit. Meanwhile, the fiscal response consisted of

emergency funding to federal agencies, as well as aid and support to affected citizens and

organizations. U.S. policies had certain success in curbing the impact of the pandemic,

although there were various shortcomings as well. There are valuable lessons for future

crises, emphasizing the role of forward planning and preparedness, adaptability and

inclusivity in policy design, investing in public health and digital infrastructure, and when a

crisis hits, it is crucial to react with speed, flexibility and provide targeted assistance.

2. Introduction:

2.1. Economic policy:

Economic policy is the set of controls used by the government to regulate economic

activity. Economic policy can be broadly classified into three areas:

2.1.1. Fiscal policy

Definition:

Fiscal policy refers to the use of government spending and tax policies to influence

economic conditions, especially macroeconomic conditions. These include aggregate demand

for goods and services, employment, inflation, and economic growth. (Hayes, 2023)

Expansionary Fiscal Policy: occurs when the government decreases taxes and/or
increases its spending to increase aggregate demand in the economy.
Contractionary Fiscal Policy: occurs when the government increases taxes and/or
decreases its spending to decrease aggregate demand in the economy.
 2

Fiscal policy is a crucial component of overall economic management, and its

effectiveness depends on the ability of policymakers to strike the right balance between

short-term stabilization goals and long-term fiscal sustainability. The implementation of fiscal

policies requires careful consideration of economic conditions, timing, and the potential

impact on various sectors of the economy.

2.1.2. Monetary policy

Definition:

Monetary policy is a set of tools used by a nation's central bank to control the overall

money supply and promote economic growth. It involves strategies such as revising interest

rates and changing bank reserve requirements. (The Investopedia Team, 2023)

Monetary policy is the control of the quantity of money available in an economy and

the channels by which new money is supplied. Economic statistics such as gross domestic

product (GDP), the rate of inflation, and industry and sector-specific growth rates influence

monetary policy strategy. Monetary policies are seen as either expansionary or contractionary

depending on the level of growth or stagnation within the economy.

Contractionary monetary policy:

A contractionary monetary policy is implemented by increasing key interest rates thus

reducing market liquidity (money supply). Low market liquidity usually negatively affect

production and consumption

Expansionary monetary policy:

An expansionary monetary policy is implemented by lowering key interest rates thus

increasing market liquidity (money supply). High market liquidity usually encourages more

economic activity.

Monetary policy is another key component of economic management, and it involves

the control and regulation of the money supply and interest rates by a country's central bank.
 3

Like fiscal policy, monetary policy plays a vital role in influencing economic activity,

controlling inflation, and promoting overall economic stability.

2.2. Overview of the pandemic in the United States

COVID-19 From a series of hospitalizations in Wuhan, China in December 2019,

COVID-19 began to appear in other countries with largely unknown severity and

spreadability. For the U.S., the first cases were identified in January 2020 but numbers

remained low, prompting a few cautionary measures by the Centers for Disease Control and

Prevention (CDC, 2023a).

Domestic and international situations had changed drastically by March 2020. The

World Health Organization (WHO) declared COVID-19 a global pandemic on March 11, and

2 days later, the Trump administration declared a national emergency. To counter the rapid

spread and overcrowded healthcare centers, local and federal governments enacted social

distancing, healthcare, and fiscal policies. These included travel restrictions, stay-at-home

orders, financial stimulus and relief, public health campaigns, and telehealth support, among

others. Plans for reopening were drafted, and many states were optimistic. In the coming

months, however, the U.S. reached the highest number of infections and fatalities in the

world and the highest unemployment rate since the Great Depression.

December 2020 witnessed the first vaccine doses being administered to the public.

From this point, widespread vaccination programs were held, and there were multiple

attempts to loosen restrictions. Nevertheless, the occasional outbreaks and new SARS-CoV-2

variants meant that infections and deaths remained high well into 2022 (CDC, 2023a).

On May 11, 2023, the national emergency officially came to an end (CDC, 2023b).

2.3. Study Objectives

Scope of the study

 4

The primary focus of this study will be on the U.S. government’s economic policies,

particularly monetary and fiscal ones, in response to the COVID-19 pandemic between 2019

and 2023. The pandemic’s economic impacts surrounding the policies, along with the

effectiveness of the response and possible lessons will also be discussed.

Significance of understanding U.S. government response

The U.S. was among the countries severely impacted by the COVID-19 pandemic,

with the highest infection and death numbers alongside record unemployment in the

contemporary era and other economic consequences (CDC, 2023a). The country is also

known for its controversial response to the crisis, with various successes and failures.

Examining U.S. economic policies during this era will therefore provide valuable lessons in

terms of predicting, planning, and responding to future crises.

3. COVID’s economic impact on the US:

3.1. GDP

The COVID-19 pandemic had a profound impact on the US GDP. The GDP growth

rate experienced a significant decline of 31.4%, which is the most severe contraction since

the Great Depression. (Mje, 2022)

 5

Figure 1; Real GDP: Percent change from preceding quarter (BEA

2020)

The decrease in GDP during the COVID-19 pandemic in the United States can be

attributed to several factors:

Shutdown of businesses

Many businesses, particularly those in the hospitality and travel industry, were forced

to shut down due to lockdown measures and travel restrictions. This led to a significant

reduction in income and spending, which negatively impacted GDP. (Azar et al., 2021)

Shift to online business operations

The pandemic forced many businesses to move their operations online. While this

shift has resulted in a greater reliance on technology and online platforms, it also led to a

decrease in GDP. This is because the productivity of these businesses may have been lower

due to the change in operational environment and the lack of face-to-face interaction. (Azar et

al., 2021)

Impact on education and healthcare services

The transition to virtual learning and telemedicine during the pandemic led to a

significant reduction in the volume of education and healthcare services. This reduction in

output, combined with the lower costs of providing these services, led to a decrease in GDP.

(Chowdhury et al., 2021)

Decrease in consumer spending

With many businesses closed and people losing their jobs, consumer spending

decreased significantly. This led to a reduction in GDP as less money was being spent on

goods and services. (Azar et al., 2021)

Impact on government consumption expenditure:

 6

The pandemic led to an increase in government spending on areas such as healthcare,

education, and unemployment benefits. However, the decrease in GDP was also due to a

decrease in government consumption expenditure. (Chowdhury et al., 2021)

3.2. Labor market

The COVID-19 pandemic has had a significant impact on the U.S. labor market,

leading to numerous changes and challenges. (Groshen, 2020)

Firstly, the pandemic has led to a significant loss of jobs. About 15% of payroll jobs

(22 million) were lost in March and April 2020. Despite the recovery of about half of the

payroll jobs lost by September, labor market conditions remain dire. COVID-19 disruptions

affected more than a quarter of the U.S. labor force in April 2020.

Figure 2: Payroll job losses during COVID-19 recession compared to post-WWII recessions

(NCBI 2020)
 7

Secondly, the recovery process has been slow and uneven. The pace of the jobs

recovery has slowed markedly since June 2020, reflecting fewer business reopenings and

mounting recessionary influences. The share of disrupted workers who have maintained

relationships with employers, which began very high, is declining, dimming prospects for

further rapid recovery.

Thirdly, the impact of the pandemic has varied by industry sector. The sectors most

affected were leisure and hospitality, retail trade, professional and business services, and

healthcare and social services. These sectors accounted for 49% of jobs in February, 69% of

jobs lost in March and April, and 75% of the jobs gained from April to September.
 8

Figure 3: COVID-19 job losses and rebound by major industry sector (in millions),

February–September 2020 (NCBI 2020)

Lastly, the pandemic has exacerbated disparities in the labor market. The COVID-19

pandemic has disrupted the work of U.S. workers unequally, with male and white workers

faring better than female, African American, Asian, and Hispanic workers. Jobs held by

white workers have been less disrupted than jobs held by African American or Hispanic

workers, and they recovered faster between April and June.

 9

In conclusion, the COVID-19 pandemic has had a profound impact on the U.S. labor

market, leading to significant job losses and recovery challenges. The impact has varied by

industry sector and has exacerbated existing disparities in the labor market.

3.3. Economic sector

Figure 4: 12-month percent change in employment by industry, November 2019-20

 10

Figure 5: Unemployment change and share of workers who are Hispanic or Latino

3.3.1. Leisure and hospitality

Tourism:

While every metropolitan area has hotels, only a few stake their economies on them.

Las Vegas, a city that thrives on tourism, saw a drastic drop in its hotel occupancy rates. In

November 2019, 88% of Las Vegas's hotel rooms were occupied. However, by November

2020, this figure had plummeted to just 47%. Similarly, the number of passengers passing

through Las Vegas's McCarran International Airport in November 2020 was 59% less than a

year earlier, and the city saw 52% fewer tourists. Orlando is suffering a similar fate, its

airport serviced 44% fewer flights in October 2020 compared to a year before. (Klein &

Smith, 2021)

Employment:

Ten months after the first wave of closures brought on by COVID-19, over 16% of the

labor force in the leisure and hospitality sector is unemployed, making it the industry with the
 11

highest unemployment rate during the pandemic. The overall unemployment rate was higher

in cities that rely heavily on tourism and hospitality. Las Vegas and Orlando, for instance,

both rank among the top 50 metro areas in November 2020 unemployment and have a high

concentration of jobs in the hospitality industry. Figure 4 shows that since November 2019,

employment in the leisure and hospitality industry in Las Vegas has decreased by 21.4%

points. This rate fell by at least 30% in Seattle, San Francisco, Orlando, and Washington,

D.C. And Reno suffered the smallest employment decline which is only about 16%. (Klein &

Smith, 2021)

3.3.2. Information and Government:

While COVID-19 devastated industries that relied on face-to-face communication,

distance limitations led to a sharp rise in the use of technology for remote work and business

transactions; as a result, companies of all stripes increased their technology spending.

Government and information technology have performed well in comparison to other

industries.

Information:

In response to the pandemic, Amazon added 400,000 jobs in 2020, nearly doubling its

workforce (Greene, 2020). Between February and April 2020, sales for non-store retailers

(i.e., online shopping) increased by 15% (OECD, 2020). Facebook also declared that it would

bring on 10,000 more employees in April 2020 (Spangler, 2020). The unemployment rate in

the information industries over a 12-month period is less than half that of the leisure and

hospitality industries (Figure 5). As a result, COVID-19 is a relative winner for technology

companies even though it is a net loser for society as a whole. (Klein & Smith, 2021)

Government:

The federal government added more than 50,000 jobs between the end of 2019 and

the end of 2020, and the D.C. metro area saw an increase in government employment of more
 12

than 2% in response to COVID-19 (Figure 4). Washington also responded to the pandemic

with new funding and jobs. Our analysis should be interpreted with caution because, although

hiring in the federal government has not decreased, it has in state and municipal governments.

State and local governments across the country lost over 1.1 million jobs during the same

period, more than offsetting the federal employment boost. Thus, state capitals may not be

experiencing similar government booms to Washington D.C. (Klein & Smith, 2021)

4. The response of the US government

4.1. Monetary policy

Hypothesis

Monetary policy is a set of tools used by a nation's central bank to control the overall

money supply, promote economic growth and employ strategies such as revising interest rates

and changing bank reserve requirements. In the United States, the Federal Reserve Bank

implements monetary policy through a dual mandate to achieve maximum employment while

keeping inflation in check. (The Investopedia team, 2023)

Monetary policies are seen as either expansionary or contractionary depending on the

level of growth or stagnation within the economy.

a. Contractionary: A contractionary policy increases interest rates and limits the

outstanding money supply to slow growth and decrease inflation, where the prices of

goods and services in an economy rise and reduce the purchasing power of money.

b. Expansionary: During a slowdown or a recession, an expansionary policy grows

economic activity. By lowering interest rates, saving becomes less attractive, and

consumer spending and borrowing.

Monetary policy is one of the ways that a government can impact the economy and is

primarily used to control inflation, stabilize the national currency, establish competitive trade

conditions, and maintain low unemployment

 13

Application

The FED uses expansionary policy to save the economy from the pandemic’s impacts.

a. Lowering the Policy Rate and Keeping it Low:

First, the Fed’s monetary policymaking body—the Federal Open Market Committee

(FOMC)—quickly lowered the target range for the federal funds rate. The federal funds rate,

which serves as the FOMC’s policy interest rate, is the rate banks charge each other for

overnight loans. The Fed cut its target for the federal funds rate, the rate banks pay to borrow

from each other overnight, by a total of 1.5 percentage points at its meetings on March 3 and

March 15, 2020. These cuts lowered the funds rate to a range of 0% to 0.25%. (Federal

Reserve issues FOMC statement, 2020). The federal funds rate is a benchmark for other

short-term rates and also affects longer-term rates, so this move was aimed at supporting

spending by lowering the cost of borrowing for households and businesses. During two

unscheduled meetings on March 3 and March 15, the FOMC voted to reduce the target range

for the federal funds rate by a total of 1½ percentage points, dropping it to near zero. The

graph below shows the rapid decline.

 14

Figure 6: Federal funds rate in U.S

Source: Board of Governors of Federal Reserve System (US), 2020

In addition, starting with its March 15 statement, the FOMC has indicated that it expects

to keep the policy rate, which is the interest rate used by the central bank as an instrument of

monetary policy at that level until the economy has weathered recent events and is on track to

meet the Fed’s dual mandate. Movements in the policy rate influence other interest rates in

the economy, such as those for home and car loans. These steps have helped make borrowing

costs low for households and businesses at a critical time. They are also intended to spur

spending and investment when the economy emerges from the depths of the crisis. (Ihrig et

al., 2020)

FED also provides to all the businesses the “forward guidance”. Forward guidance is a

tool that central banks use to provide communication to the public about the likely future

course of monetary policy. When central banks provide forward guidance, individuals and

businesses will use this information in making decisions about spending and investments.
 15

Thus, forward guidance about future policy can influence financial and economic conditions

today. (Board of Governors of the Federal Reserve System, 2015). Using a tool honed during

the Great Recession of 2007-09, the Fed offered forward guidance on the future path of

interest rates. Initially, it said that it would keep rates near zero “until it is confident that the

economy has weathered recent events and is on track to achieve its maximum employment

and price stability goals.”

In September 2020, reflecting the Fed’s new monetary policy framework, it

strengthened that guidance, saying that rates would remain low “until labour market

conditions have reached levels consistent with the Committee’s assessments of maximum

employment and inflation has risen to 2 per cent and is on track to moderately exceed 2

percent for some time.” (Board of Governors of the Federal Reserve System, 2020). By the

end of 2021, inflation was well above the Fed’s 2% target and labor markets were nearing the

Fed’s “maximum employment” target. At its December 2021 meeting, the Fed’s

policy-making committee, the Federal Open Market Committee (FOMC), signaled that most

of its members expected to raise interest rates in three one-quarter percentage point moves in

2022.

The Fed simultaneously resumed purchasing massive amounts of debt securities, a key

tool it employed during the Great Recession. Responding to the acute dysfunction of the

Treasury and mortgage-backed securities (MBS) markets after the outbreak of COVID-19,

the Fed’s actions initially aimed to restore smooth functioning to these markets, which play a

critical role in the flow of credit to the broader economy as benchmarks and sources of

liquidity.(Milstein and Wessel, 2021) On March 15, 2020, the Fed shifted the objective of QE

to supporting the economy. It said that it would buy at least $500 billion in Treasury

securities and $200 billion in government-guaranteed mortgage-backed securities over “the

coming months.”(Federal Reserve, 2020) On March 23, 2020, it made the purchases
 16

open-ended, saying it would buy securities “in the amounts needed to support smooth market

functioning and effective transmission of monetary policy to broader financial conditions,”

expanding the stated purpose of the bond-buying to include bolstering the economy (Federal

Reserve, 2020). In June 2020, the Fed set its rate of purchases to at least $80 billion a month

in Treasuries and $40 billion in residential and commercial mortgage-backed securities until

further notice. The Fed updated its guidance in December 2020 to indicate it would slow

these purchases once the economy had made “substantial further progress” toward the Fed’s

goals of maximum employment and price stability. In November 2021, judging that the test

had been met, the Fed began tapering its pace of asset purchases by $10 billion in Treasuries

and $5 billion in MBS each month. At the subsequent FOMC meeting in December 2021, the

Fed doubled its tapering speed, reducing its bond purchases by $20 billion in Treasuries and

$10 billion in MBS each month.

b. Stabilizing Financial Markets

Second, the Fed took several steps to unfreeze key financial markets and to help them

run smoothly. For example, trading conditions in the market for U.S. Treasury securities,

which is critical to the overall functioning of the financial system, showed severe strains in

early and mid-March. In other words, the prices of these securities were very volatile and it

was difficult for sellers to find sufficient buyers. (For more discussion of these conditions, see

the Fed’s May 2020 Financial Stability Report and a July 2020 speech by Lorie Logan, an

executive vice president at the New York Fed.) The blue-shaded region of the graph below

shows how quickly the Fed ramped up its purchases of Treasury securities—it bought around

$1.7 trillion worth between mid-March and the end of June. The Fed also increased its

purchases of mortgage-backed securities, as shown in green. In general, the Fed’s purchases

of securities keep markets working when assets are otherwise difficult to sell. The purchases
 17

also inject cash into the economy and convey to the public that the Fed stands ready to

backstop important parts of the financial system. (Ihrig et al., 2020)

Figure 7: The FED increased its holdings of U.S Government Securities

Source: Board of Governors of Federal Reserve System (US), 2022

Through the Primary Dealer Credit Facility (PDCF), a program revived from the

global financial crisis, the Fed offered low-interest rate loans up to 90 days to 24 large

financial institutions known as primary dealers. (Primary dealers are trading counterparties

of the New York Fed in its implementation of monetary policy. They are also expected to make

markets for the New York Fed on behalf of its official account holders as needed, and to bid

on a pro-rata basis in all Treasury auctions at reasonably competitive prices). The dealers

provided the Fed with various securities as collateral, including commercial paper and

municipal bonds. The goal was to help these dealers continue to play their role in keeping

credit markets functioning during a time of stress. Early in the pandemic, institutions and
 18

individuals were inclined to avoid risky assets and hoard cash, and dealers encountered

barriers to financing the rising inventories of securities they accumulated as they made

markets. To re-establish the PDCF, the Fed had to obtain the approval of the Treasury

Secretary to invoke its emergency lending authority under Section 13(3) of the Federal

Reserve Act, which is a provision that allows the Federal Reserve to lend money to private

Figure 9: Pandemic-era Federal Reserve facilities

Source: Federal Reserve, ESF Treasure’s Exchange Stabilitization Fund, 2021

entities in “unusual and exigent circumstances” for the first time since the 2007-09 crisis

((Board of Governors of the Federal Reserve System, 2010). The program expired on March

31, 2021.
 19

The Fed also re-launched the crisis-era Money Market Mutual Fund Liquidity Facility

(MMLF). This facility lent to banks against collateral they purchased from prime money

market funds, which invest in Treasury securities and corporate short-term IOUs known as

commercial paper. At the onset of COVID-19, investors, questioning the value of the private

securities these funds held, withdrew from prime money market funds en masse. To meet

these outflows, funds attempted to sell their securities, but market disruptions made it

difficult to find buyers for even high-quality and shorter-maturity securities. These attempts

to sell the securities only drove prices lower (in a “fire sale”) and closed off markets that

businesses rely on to raise funds. In response, the Fed set up the MMLF to “assist money

market funds in meeting demands for redemptions by households and other investors,

enhancing overall market functioning and credit provision to the broader economy.” The Fed

invoked Section 13(3) and obtained permission to administer the program from Treasury,

which provided $10 billion from its Exchange Stabilization Fund to cover potential losses.

Given limited usage, the MMLF expired on March 31, 2021.

The Fed vastly expanded the scope of its repurchase agreement (repo) operations to

funnel cash to money markets. The repo market is where firms borrow and lend cash and

securities short-term, usually overnight. Since disruptions in the repo market can affect the

federal funds rate, the Fed’s repo operations made cash available to primary dealers in

exchange for Treasury and other government-backed securities. Before coronavirus turmoil

hit the market, the Fed was offering $100 billion in overnight repo and $20 billion in

two-week repo. Throughout the pandemic, the Fed significantly expanded the program—both

in the amounts offered and the length of the loans. In July 2021, the Fed established a

permanent Standing Repo Facility to backstop money markets during times of stress.

Sales of U.S. Treasury securities by foreigners who wanted dollars added to strains in

money markets. To ensure foreigners had access to dollar funding without selling Treasuries
 20

in the market, the Fed in July 2021 established a new repo facility called FIMA that offers

dollar funding to a considerable number of foreign central banks that do not have established

swap lines with the Fed. The Fed makes overnight dollar loans to these central banks, taking

Treasury securities as collateral. The central banks can then lend dollars to their domestic

financial institutions.

Using another tool that was important during the global financial crisis, the Fed made

U.S. dollars available to foreign central banks to improve the liquidity of global dollar

funding markets and to help those authorities support their domestic banks that needed to

raise dollar funding. In exchange, the Fed received foreign currencies and charged interest on

the swaps. For the five central banks that have permanent swap lines with the Fed—Canada,

England, the Eurozone, Japan, and Switzerland—the Fed lowered its interest rate and

extended the maturity of the swaps. It also provided temporary swap lines to the central banks

of Australia, Brazil, Denmark, Mexico, New Zealand, Norway, Singapore, South Korea, and

Sweden. In June 2021, the Fed extended these temporary swaps until December 31, 2021.

Direct lending to banks: The Fed lowered the rate that it charges banks for loans from

its discount window by 2 percentage points, from 2.25% to 0.25%, lower than during the

Great Recession. These loans are typically overnight—meaning that they are taken out at the

end of one day and repaid the following morning—but the Fed extended the terms to 90 days.

At the discount window, banks pledge a wide variety of collateral (securities, loans, etc.) to

the Fed in exchange for cash, so the Fed takes little (or no) risk in making these loans. The

cash allows banks to keep functioning since depositors can continue to withdraw money and

the banks can make new loans. However, banks are sometimes reluctant to borrow from the

discount window because they fear that if word leaks out, markets and others will think they

are in trouble. To counter this stigma, eight big banks agreed to borrow from the discount

window in March 2020.

 21

The Fed encouraged banks—both the largest banks and community banks—to dip

into their regulatory capital and liquidity buffers to increase lending during the pandemic.

Reforms instituted after the financial crisis require banks to hold additional loss-absorbing

capital to prevent future failures and bailouts. However, these reforms also include provisions

that allow banks to use their capital buffers to support lending in downturns. The Fed

supported this lending through a technical change to its TLAC (total loss-absorbing capacity)

requirement—which includes capital and long-term debt—to gradually phase in restrictions

associated with shortfalls in TLAC. (To preserve capital, big banks also suspended buybacks

of their shares.) The Fed also eliminated banks’ reserve requirement—the per cent of deposits

that banks must hold as reserves to meet cash demand—though this was largely irrelevant

because banks held far more than the required reserves. The Fed restricted dividends and

share buybacks of bank holding companies throughout the pandemic, but lifted these

restrictions effective June 30, 2021, for most firms based on stress test results. These stress

tests showed that banks had ample capital to support lending even if the economy performed

far weaker than anticipated.

c. Supporting the Flow of Credit in the Economy

Third, to support the flow of credit to businesses, households and communities where

it was not otherwise available, the Fed introduced several temporary lending and funding

facilities. These facilities are formal financial assistance programs offered by the Fed to help

eligible borrowers with funding needs. The Fed is authorized to use these lending—not

spending—powers only in special circumstances and with the approval of the Treasury

Secretary. You may have heard these kinds of emergency measures referred to as “13(3)”

facilities. That’s because the Fed’s authority for these measures comes from Section 13(3) of

the Federal Reserve Act. Overall, the Fed has introduced multiple temporary facilities to
 22

support various types of funding and credit markets, as well as businesses of all sizes. Two of

the commonly discussed facilities are:

The Paycheck Protection Program Liquidity Facility was established to help small

businesses keep their workers on the payroll; this facility supports the related Paycheck

Protection Program created by the Coronavirus Aid, Relief, and Economic Security (CARES)

Act and administered by the Small Business Association. (Board of Governors of the Federal

Reserve System, 2021)

The Main Street Lending Program (a set of five facilities), was established to

support lending to both small and midsize businesses and nonprofit organizations. ((Board of

Governors of the Federal Reserve System, 2021)

Evaluation

As the central bank of the United States, the Federal Reserve's (Fed's) mission is to

promote the effective operation of the U.S. economy. It uses monetary policy—actions to

achieve maximum employment and stable prices (also known as its "dual mandate")—to

support economic growth. Effective monetary policy complements fiscal policy—the use of

government spending and tax policies to affect economic conditions. The Fed also promotes

the stability of the financial system; stable financial markets are necessary for a

well-functioning economy. (Ihrig, Weinbach and Wolla, 2020)

The Fed plays a particularly important role in quelling financial and economic crises.

It was created in part to do just that: After decades of destabilizing banking panics and other

crises, the Fed was founded in 1913 to provide the nation with a safe, flexible, and stable

monetary and financial system. When crises arise, the Fed is authorized to act as the "lender

of last resort." That is, in certain circumstances, the Fed may provide funds to the financial

system when they are urgently needed and market sources have been exhausted. Doing so

keeps the financial system functioning and prevents economic downturns from deepening.
 23

This authority came into play with the onset of the COVID-19 pandemic. Here we look at the

substantial economic shock brought on by the pandemic and the steps the Fed took in the

initial weeks to aid the economy.

However, the core problem the economy faces is not a lack of liquidity, but a

temporary halt of activity due to health restrictions and a fundamental question of

solvency for many firms and individuals. Thus, the activities of the Federal Reserve are

important, but unlikely to be sufficient. In many economic slowdowns, the Federal Reserve is

the front line of defense. In this case, it has already lowered interest rates to zero and begun

sizable purchases of assets along with injections of liquidity into financial markets. These

actions are important, but unlikely to shield the economy from widespread damage. First,

the shutting of businesses and limits on travel will cause economic activity to contract

regardless of policy. Second, as the Federal Reserve has already lowered rates to zero, it is

out of conventional ammunition to stimulate the economy, leaving it to use alternate tools

like asset purchases or forward guidance. The Federal Reserve typically stimulates the

economy by making it easier and less expensive to borrow, encouraging firms and consumers

to accelerate investment and purchasing decisions. In this case, the uncertainty about the

eventual outcomes of the COVID-19 pandemic and the economic fallout may make it very

difficult for firms to borrow regardless of rates (the credit risk may keep banks from lending),

and more importantly, the option value of waiting to see the resolution of the pandemic will

likely slow any investment or major purchase decisions.

=> The primary goal for fiscal policy at present should be to cushion the downward

shock as much as possible and set the conditions for the economy to bounce back after

the restrictions on economic activity are removed. Over time, fiscal policy can be used to

try to help restart the economy. Beyond spending on the crisis itself, there are several

important roles for fiscal policy. While discussions at present refer to stimulus, in some ways
 24

it is the wrong term. The economy is being shuttered to allow for social distancing and to stop

the virus. First, federal fiscal policy can strengthen the safety net to make sure anyone losing

a job or with limited resources can get through the next few months. The expansion of paid

sick leave benefits to a wider (though still limited) set of the population could be an important

economic cushion and a way to slow the spread of the virus. In addition, the government can

distribute funds directly to households to ensure that families have a financial cushion and

that there is adequate purchasing power in the economy as households weather social

distancing and when restrictions are lifted. Fiscal policy can be used to guarantee loans

and/or provide direct support to firms that are in trouble to prevent systemic problems to

maintain their payrolls. Finally, the federal government can provide financial support to

states. States have limited capacity to borrow, and when their costs go up (due to health and

public safety measures) but revenues go down (due to lower tax returns), they are often

forced to cut spending. Federal support can shore up state spending, especially as states are

on the front lines of the public health crisis. Over time, the emphasis of fiscal policy should

shift toward increasing spending and resources in the economy to restart economic activity.

4.2. Fiscal policy

Hypothesis

Fiscal policies are policies related to the act of using government spending and tax

policies to influence economic conditions, especially macroeconomics including aggregate

demand for goods and services, employment, inflation, and economic growth.

One of the main effects of fiscal policy is to deal with recession by lowering tax rates

or increasing spending to encourage demand and urge economic activities. On the other hand,

the government may also increase interest rates or cut down spending to combat inflation

(Adam Hayes, 2023).

Types of fiscal policy:

 25

a. Expansionary fiscal policy: Expansionary fiscal policy is when the government

expands the money supply in the economy using budgetary tools to either increase

spending or cut taxes—both of which provide consumers and businesses with more

money to spend. (The Investopedia Team, 2023).

b. Contractionary fiscal policy: Contractionary fiscal policy is when the government

either cuts spending or raises taxes. It gets its name from the way it contracts the

economy. It reduces the amount of money available for businesses and consumers to

spend. It could slow down the growth of the economy (Kimberly Amadeo, 2022).

=> Fiscal policy affects each individual and businesses differently. For example, a tax

cut could affect only the middle class and while there is a rise in taxation, this group will

have to pay more than the richer ones. On the other hand, if the government increases its

spending on a certain purpose, it might raise the income of several people (Adam Hayes,

2023).

Application

During the COVID-19 pandemic, the U.S. government published several

expansionary fiscal policies that mainly funded several groups of people and organizations to

boost economic activity throughout this period.

a. The Coronavirus Preparedness and Response Supplemental Appropriations Act

Figure 9: Funding distributions of the Coronavirus Preparedness and Response Supplemental

Appropriations Act
 26

On March 6, 2020, The Coronavirus Preparedness and Response Supplemental

Appropriations Act, 2020 (P.L. 116-123) was signed into law by the President. The bill

provided $8.3 billion in emergency funding for federal agencies to respond to the coronavirus

outbreak. Of the $8.3 billion, $6.7 billion (81%) is designated for the domestic response and

$1.6 billion (19%) for the international response. The bills support the research of

vaccinations, improve healthcare in and out of the country and stabilize the economy when

facing the outbreak (Stephanie Oum, Adam Wexler, and Jennifer Kates, 2020). Of the $6.7

billion spending on domestic purposes, the majority $6.2 billion is for the Department of

Health and Human Services (HHS), this include:

$3.4 billion for the Office of the Secretary – Public Health and Social Services
Emergency Fund (PHSSEF), which includes more than $2 billion for the Biomedical
Advanced Research and Development Authority (BARDA), $300 million in contingency
funding for the purchase of vaccines, therapeutics, and diagnostics to be used if deemed
necessary by the Secretary of HHS, and $100 million for the Health Resources and Services
Administration (HRSA) for grants under the Health Center Program, which aims to improve
health care to people who are geographically isolated and economically or medically
vulnerable.
$1.9 billion for the Centers for Disease Control and Prevention (CDC), which
includes $950 million for state and local response efforts, of which $475 million must be
allocated within 30 days of the enactment of the bill, and $300 million for the replenishment
of the Infectious Diseases Rapid Response Reserve Fund, which supports U.S. efforts to
respond to an infectious disease emergency.
$836 million for the National Institute of Allergy and Infectious Diseases (NIAID),
which conducts research on therapies, vaccines, diagnostics, and other health technologies, at
the National Institutes of Health (NIH).
$61 million for the Food and Drug Administration (FDA) for the development and
review of vaccines, therapeutics, medical devices and countermeasures, address potential
supply chain interruptions, and support enforcement of counterfeit products.
 27

The remaining amount of money is mainly spent on telehealth services. Only a small
amount of money, about $20 million, is for the Small Business Administration (SBA) disaster
loans program to support SBA’s administration of loan subsidies.
For the international response:
The majority, $986 million, is provided to the United States Agency for International
Development (USAID) including: $435 million for the Global Health Programs (GHP), $300
million for the International Disaster Assistance (IDA), $250 million for the Economic
Support Fund (ESF), $1 million for the Office of the Inspector General (OIG).
The State Department receives $264 million to support consular operations,
emergency evacuations, and other needs at U.S. embassies.
$300 million is provided to CDC to support global disease detection and emergency
response efforts.
The funding program rapid response to the outbreak through focusing on the health
institutions and programs. Most of the funding is contributed to the stabilization of the
domestic pandemic condition and only a small amount of money is paid for supporting
businesses.
b. The Families First Coronavirus Response Act:

The Families First Coronavirus Response Act (FFCRA) is a law signed on March 18,

2020, as the second major legislative initiative designed to address the COVID-19 crisis. The

act was effective from the first of April through December 31, 2020 (Jim Probasco, 2021).

Key provisions of the FFCRA include:

Nutrition Assistance: This provision addressed four nutrition programs, including

the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), The

Emergency Food Assistance Program (TEFAP), the Supplemental Nutrition Assistance

Program (SNAP), and a program serving U.S. territories (Northern Mariana Islands, Puerto

Rico, and American Samoa) (Kellie Moss et al, 2020).

 28

Emergency Paid Leave: The FFCRA provides up to two weeks (80 hours) of paid

sick leave plus an additional 12 weeks (10 of those weeks paid) of expanded family and

medical leave for reasons related to COVID-19 (Jim Probasco, 2021).

Extended Unemployment Insurance: The FFCRA expanded unemployment

insurance, offering additional funding to states and easing eligibility requirements and access

to unemployment compensation (Kellie Moss et al, 2020).

Free Coronavirus Testing: The act mandated free coronavirus testing for everyone,

but it did not cover treatment (Jim Probasco, 2021).

Increased Federal Medicaid Funding: The FFCRA increased the federal medical

assistance percentage (FMAP) to states and territories, provided they satisfied certain

conditions (Kellie Moss, 2020).

Tax Credits for Employers: The FFCRA offered tax credits to employers to offset

the costs of providing emergency sick leave and family medical leave (Jim Probasco, 2021).

c. The Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief, and

Economic Security Act (CARES). The bill included $2.2 trillion and was the largest financial

rescue package in US history (The Investopedia Team, 2023).

 29

Figure 10: Recipients of the total funding of CARES Act (The Investopedia

Team, 2023)

The CARES Act is divided into 7 major areas: benefits for individuals,

unemployment assistance, small business relief, big and medium-sized business relief, tax

breaks and credits, hospital and health care assistance, and state and local government.

Individuals benefits: The government supported individuals through direct payments

to families, head of households, couples making up to over $300,000. Moreover, other loans

like student loans, renting payments and renting expiration date were interfered in order to

support the residents.

Unemployment assistance: Eligibility for unemployment benefits was extended to

those who otherwise would not qualify if their loss of work was related to the COVID-19

pandemic. The CARES Act also established the Pandemic Emergency Unemployment
 30

Compensation (PEUC) program to assist the unemployment condition of the country. The

Pandemic Unemployment Assistance (PUA) extended benefits to self-employed individuals,

freelancers, and independent contractors.

Small business relief: Small businesses got direct financial support from the

Paycheck Protection Program (PPP). The law appropriated $349 billion to support small

businesses' efforts to maintain their payrolls and some overhead expenses through the

emergency so that they could keep workers employed and paid when the revenue declined.

Besides, emergency loans and economic injury disaster loans were paid to further stabilize

the economic activities.

Big and mid-sized business relief: In order to provide liquidity to the hardest-hit

businesses and industries, the CARES Act allocated $500 billion for economic stabilization

loans and guarantees. Moreover, it created a new Employee Retention Credit (ERC) against

employment taxes, which was intended to encourage them to retain and pay their employees

during any quarter when business operation was partially or fully suspended due to the

coronavirus (IRS, 2023).

Tax breaks and credits: Individual taxpayers could claim the amount of money they

were due as tax credit (U.S. Department of the Treasury). The plan also allowed people to

take special disbursements and loans from tax-advantaged retirement funds of up to $100,000

without facing a tax penalty.

Hospital and health care providers assistance: The plan boosted payments to

healthcare providers and suppliers by $100 billion through various programs, including

Medicare reimbursements, grants, and other direct federal payments. It also directed $27

billion in spending on tests, vaccine development, and medical treatment devices, including

$16 billion in purchases for the Strategic National Stockpile. The stimulus plan relaxed

numerous laws, Medicare payment rules, and drug approval requirements to allow more
 31

flexibility to respond to the emergency. It also provided new rules that covered insurance for

virus testers and vaccination development.

State and local government relief: State and local governments received up to $150

billion in assistance through the new Coronavirus Relief Fund.

In this period of time, the U.S. switched more attention into the injuries of the

economy and businesses. The payment for health was large yet at a much smaller proportion

compared to firms and individuals fundings (The Investopedia Team, 2023).

d. The American Rescue Plan

The American Rescue Plan Act of 2021 is a $1.9 trillion economic stimulus bill that

was passed by the 117th United States Congress and signed into law by President Joe Biden

on March 11, 2021. Its purpose is to speed up the United States' recovery from the economic

and health effects of the COVID-19 pandemic and the ongoing recession (U.S. Department of

The Treasury, 2021)*. The package includes several key provisions for different sectors:

Education: $122 billion for K-12 schools to improve ventilation in school buildings,

reduce class sizes for social distancing, purchase personal protective equipment, and hire

support staff (Republican Policy Committee).

At least half of the money for colleges and universities must go to emergency grants

for students. Additionally, 20% of school funding must be used for counteracting "learning

loss" for students who missed school during the pandemic.

Almost $40 billion for colleges and universities, including over $10 billion for

community colleges, over $2.7 billion for Historically Black Colleges and Universities

(HBCUs), and about $5 billion for Asian American and Native American Pacific

Islander-serving institutions (AANAPISIs).

Small Businesses: $28.6 billion for the Restaurant Revitalization Fund, providing

grants up to $5 million each for restaurants and bars to meet payroll and other expenses.
 32

$15 billion for Emergency Injury Disaster Loans, $7 billion for the Paycheck

Protection Program and $1.25 billion for the Shuttered Venue Operators Grant.

Tax Provisions: The plan includes three tax increases on large corporations and

wealthy individuals, raising $60 billion in revenue. It also makes forgiven student loan debt

tax-free, should any debt be canceled.

Relief Checks and Unemployment Benefits: The plan provides stimulus checks of

$1,400 for individuals earning up to $75,000 and couples earning up to $150,000, with the

payment amount decreasing for higher incomes and phasing out entirely above $80,000 for

individuals and $160,000 for couples (govtrack).

It extends a $300 per week unemployment supplement until September 6, 2021, and

makes the first $10,200 of unemployment benefits tax-free for households with incomes

under $150,000 (govtrack).

Public Health: It provides funding for vaccine distribution and administration,

testing, and tracing, and for community health workers. It also establishes a public health

workforce loan repayment program to secure and sustain the public health workforce

(govtrack).

The American Rescue Plan Act of 2021 is expected to have significant impacts on the

economy, public health, education, and small businesses in the United States, and is designed

to provide relief and recovery from the COVID-19 pandemic.

Evaluation

Overall, the core problems the U.S. have to face come from the temporary halt of

activity due to health restriction as well as the inability to react to the outbreak of firms and

individuals. As a result, the U.S. fiscal policies aim at two main objectives: easing the

health-related conditions of the public due to the disease and recovering the economy to its

prior state (Jay Shambaugh, 2020).

 33

Throughout the campaign, the government has provided multiple health support

packages, for example, health care programs, nutrition programs…The immediate response

of the U.S. was mainly focusing on aiding the research of vaccination, supporting healthcare

institutions and disease control. Even in the long term, the U.S. spending still included

medical investment to solve the pandemic problem from its roots.

The health support packages served several purposes. First, they granted the residents

the ability to access the highest level of medical and hospital technologies. This helped

relieve people's shock of the spreading diseases. Moreover, investing in the healthcare system

gradually reduces the effect of COVID-19 and removes it from the threats to the country

ultimately. The final result is lifting health restrictions and firms and businesses would have

the capability to return to work normally.

However, to keep the economy from downgrading too much until the normalization of

the disease, the fiscal policies also targeted firms, households, and individuals. This included

tax relief, household funding, and direct payment to individuals helped maintain enough of

the purchasing power in the economy while distancing and even when the restriction was

lifted. Besides, these policies relieve sick leave payments and support unemployed

individuals so they can live through the pandemic and in return increase the net safety and

slow the spread of the disease.

Finally, fiscal policies also aimed at maintaining the survival of businesses. By

providing loans and grants to small to large businesses as well as unemployment insurance to

firms, the government helped keep workers on their payroll to maintain working frequency

after COVID-19 at its best state possible. In addition, this would support firms from growth

declining and keep them away from bankruptcy in light of the pandemic.
 34

5. Impacts and effectiveness of the response

5.1. Effectiveness of monetary policy

Worldwide restrictions to contain the spread of COVID-19 triggered a sharp drop in

global economic activity, a collapse in trade, and a severe rise in unemployment. First

estimates for 2020 point to considerable contractions of gross domestic product (GDP) in

most advanced economies (McKibbin & Fernando, 2020). The central banks responded

swiftly, providing stimulus by considerably loosening their stance. In emerging economies,

many countries successfully introduced quantitative easing for the first time. While in

advanced economies, easings took the form of rate cuts, which facilitated the use of fiscal

stimulus packages. The U.S. Federal Reserve (Fed) responded with several measures

including the opening of credit facilities to support malfunctioning markets and actions aimed

at relieving cash-flow stress for small and medium-sized businesses, as well as

municipalities. The most prominent actions, however, were moving the policy rate back

toward the zero lower bound and resuming the monthly purchase of massive amounts of

securities.

(Feldkircher et al., 2021) looked at the reaction of the CPI, unemployment rate and

industrial production in order to measure the effectiveness of monetary measures. They

compared the real figures against a counterfactual analysis in order to gauge the effectiveness

of monetary measures. Their results suggest that the Fed was successful in stimulating growth

on the back of higher equity prices and more favorable long-term financing conditions. Also,

monetary policy triggered a depreciation of the U.S. dollar supporting the external

competitiveness of the U.S. economy. However, they did not find significant effects on

unemployment and inflation, which react more slowly to economic stimulus. All in all, in

measuring the factors that react quickly to monetary measures, they found that the U.S. was

successful in its attempt to ease the economic impact of COVID-19.

 35

Figure 11: Impulse response functions to a one- standard deviation shock to M2

(Feldkircher et al., 2021)

5.2. Effectiveness of fiscal policy

In an unparalleled response to the COVID-19 pandemic, the U.S. Federal government

took swift and coordinated action, surpassing previous crisis mitigation efforts. In 2020,

federal lawmakers enacted five relief bills, providing an estimated $3.3 trillion in aid. The

American Rescue Plan, enacted in 2021, added another $1.8 trillion. This substantial policy

response contributed to making the COVID-19 recession the shortest on record and helped

drive an economic recovery that reduced the unemployment rate from a peak of 14.8 percent

in April 2020, to below 4 percent in January 2022, reaching a low of 3.4 percent in January

2023.

The largest relief package, the Coronavirus Aid, Relief, and Economic Security

(CARES) Act, was signed into law on March 27, 2020. In the short term, the CARES Act

provided immediate economic relief to individuals and businesses by increasing consumer

spending via direct cash payments to households, providing liquidity to small and

medium-sized firms, and maintaining employment through the Paycheck Protection Program

(PPP). It also temporarily expanded the unemployment insurance system (Brown & Ozoguz,
 36

2020). These measures helped reduce economic welfare losses by around 20% on average,

while the cumulative death count remained effectively unchanged (Kaplan et al., 2020).

However, the long-term impacts of the CARES Act are more complex. While the Act

provided a short-term boost to the economy, it also led to a significant increase in federal

debt. This additional debt is expected to displace private capital, leading to long-lasting

effects on wages and GDP. It's projected that this would result in a 0.2 percent decline in

GDP in both 2025 and 2030 (Dinerstein & Huntley, 2020).

During the peak of the pandemic, over 6 million Americans filed for unemployment

insurance in a single week, and 10 million Americans filed in just two weeks, leading to an

unemployment rate in April of 14.7 percent. Immediate action taken by the Administration

and Congress, along with a robust economy before COVID-19, allowed millions of

Americans to keep their jobs through expanded unemployment insurance benefits, PPP loans

for small businesses, and several Federal Reserve facilities that eased liquidity constraints on

businesses (Economic Advisors Council, 2020).

Research by Romer (2021) evaluated the effectiveness of the fiscal measures taken by

the United States in response to the pandemic. She found that the social insurance and public

health components of the $5.2 trillion US package, such as expanded unemployment

insurance and government funding of vaccine development and distribution, were highly

appropriate. However, broad-based stimulus measures, such as one-time payments to

households, were not. Furthermore, fiscal policy has been effective in preventing a more

severe economic downturn globally and contributing to higher GDP growth in advanced

economies (Chudik et al., 2021).

5.3. Economic indicators

In this section, we take a look at some key economic indicators to examine the

effectiveness of the U.S. policy further.

 37

GDP:

Real GDP of the US witnessed a large fall at the end of Quarter 1 of 2020, right at the

time when the US started to impose lockdowns, but picked up again by Quarter 2 and

remained on a stable rising course ever since, which suggests the measures taken to be

effective.

Figure 12: Real Gross Domestic Product of the U.S., Q1 2020 - Q2 2023 (Federal

Reserve Bank of St. Louis)

In the aftermath of the pandemic outbreak, the Congressional Budget Office (CBO)

released its inaugural comprehensive projections of the Gross Domestic Product (GDP) in

July 2020. These figures indicated a substantial decrease in real GDP by 11.3 percent for the

second quarter of 2020, and a 5.2 percent reduction for the fourth quarter of 2021, compared

to the pre-pandemic projections made in January 2020 (CBPP, 2023). Subsequent projections

in February 2021, however, presented a less dire outlook, with the GDP projected to be 2.3

percent below the pre-pandemic prediction by the end of 2021. Surprisingly, the actual GDP

figures at the end of 2021 closely mirrored the pre-pandemic projections (CBPP, 2023).

The CBO's projections from July 2020 took into account the impact of the

Coronavirus Aid, Relief, and Economic Security (CARES) Act and other initiatives

implemented in March and April 2020. The CBO report suggested that, in the absence of
 38

these measures, the GDP projections for 2020 and 2021 would have been 12 percent and 9

percent below the pre-pandemic projections, respectively (CBPP, 2023). However, with the

implementation of these relief and recovery measures, the economy recovered more rapidly,

resulting in significantly smaller shortfalls of 5.8 percent and 1.1 percent, respectively (CBPP,

2023).

(Louise Sheiner et al., 2022) looked at the effects of fiscal policies on the level of

GDP by comparing actual GDP with what GDP would have been had fiscal policies failed to

respond to the shocks of the pandemic. The chart shows the huge fiscal response in the spring

of 2020, and the big increase in the first quarter of 2021 representing the effects of legislation

enacted in December 2020 and January 2021.

Figure 13: Effects of Fiscal Policy on the Level of GDP (Louise Sheiner et al., 2022)
 39

Looking at the decomposition of the components of fiscal policy, the expansion of

unemployment insurance as well as other social benefits provided a considerable boost to

GDP since the start of the pandemic, but their impact is expected to diminish going forward

as consumer spending from the rebate checks wane. Subsidies to businesses increased more

slowly but provided a steady stream of spending going forward. Although federal purchases

and grants to state and local governments rose in response to the pandemic, state and local

spending has been very weak, causing total purchases to be a drag on the level of GDP. Real

government purchases are projected to be roughly neutral. Health outlays have grown just a

bit faster than potential while taxes have grown more slowly, and both are expected to rise

steadily.

The fiscal response to the pandemic has pushed the U.S. debt-to-GDP ratio from 79

percent before it emerged to 110 percent by the end of the 2023 budget year. This reduction in

"fiscal space" may discourage policymakers from tackling issues such as climate change,

infrastructure, and persistent poverty (Gabriela Goodman, 2022).

 40

Figure 14: Effects of the Components of Fiscal Policy on the Level of GDP (Louise

Sheiner et al., 2022)

Inflation rates:

In 2020, yearly inflation rates in the US reached a low of 1.2 percent, 2 times lower

than that of 2018. Starting from this low, however, annual inflation quickly rose in 2021 and

2022 to 4.7% and 8% respectively, with the height of inflation reaching 9% in June 2022.

Headline inflation, as measured by the Consumer Price Index (CPI), peaked at 9.1% for the

12-month period ending in June 2022, then dropped significantly. CPI stood at 3.7% for the

12-month period ending in September 2023. (Ball et al., 2022) found that the rise in inflation

rates in the pandemic-era can be attributed to the rise in the ratio of job vacancies to

unemployment. Moreover, they also found that the main contributors to headline shocks were

energy prices and a backlog of work, wherein energy prices contributed to the highest
 41

inflation rate in 2022. (Bernanke & Blanchard, 2023) further added to the analysis, pointing

out that the tightening of the labor market, and by extension the rise in inflation, largely

reflected strong aggregate demand, caused by easy fiscal and monetary policies, excess

savings accumulated during the pandemic, and the reopening of locked-down economies.

They also noted that the effects of tight labor markets have begun to cumulate, which still

accounts for excess inflation. This proportion of inflation can only be reversed by policy

actions that bring labor demand and supply into better balance. In response to these

historically high rates, the Fed raised the policy rate to 3.75% to 4%, its highest point since

2007 (Popli, 2022). In March 2022, as inflation surged, the Fed shifted rapidly raised rates

throughout the remainder of 2022 and into 2023 (U.S. Bank, 2023). All in all, it seems that

the Fed has been successful in reigning in soaring prices during pandemic times. However, it

seems that getting inflation to cool further to the Fed’s ideal 2% will be a difficult challenge

(Rugaber, 2023).

Figure 15: Inflation, consumer prices for the United States (Federal Reserve Bank of

St. Louis 2023)

 42

Figure 16: Monthly 12-month inflation rate in the United States from October 2020 to

October 2023 (Statista Research Department 2023)

Unemployment:

(Spadafora, 2023) looked at the role of the Unemployment Insurance system in the

U.S. during the pandemic period in order to both evaluate and point out its shortcomings.

Figure 17: UI recipients by programme 2020–21 (Spadafora, 2023)

 43

In general, the U.S. Unemployment Insurance (UI) system was found to be effective

in curbing unemployment by expansively covering and generously providing financial relief

to millions of suddenly unemployed workers. The budgetary cost of deploying the new

pandemic UI programs has inevitably been high, but pales in comparison to the economic and

social support provided by these programs. The vital role played by these programs is

demonstrated by the fact that when they expired in early September 2021 benefits provided

by the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency

Unemployment Compensation (PEUC) programs were supporting about 75 percent (8.5

million) of total unemployed workers receiving UI payments.

Despite this success, the implementation of the pandemic programs has highlighted

several limitations of the state-based regular UI system. Acknowledging the significant

heterogeneity across states in terms of performances and key UI parameters, the system has

required significant emergency legislative interventions to ensure that the microeconomic and

macroeconomic support was adequate in scope and size to address the unique challenges

posed by the pandemic. Furthermore, the pandemic has exposed the constraints posed by an

inadequate UI delivery infrastructure, not only in terms of ability to make timely payments to

UI recipients but also for the optimal design of expanded UI programs.

The Payment Protection Program has also played a major role in the fiscal stimulus

provided by Congress to assist small businesses to maintain employment amidst the

pandemic. (Autor et al., 2022) recently looked at its effect on U.S. employment. Their results

imply that PPP saved approximately 3.6 million jobs in May of 2020, and about 1.4 million

jobs at the end of 2020. However, because PPP has also stemmed business closures, the total

employment effect is likely to be considerably larger over time as those salvaged businesses
 44

re-hire furloughed workers. In total, S&P U.S. Chief Economist Beth Ann Bovino estimates

that PPP could have saved upwards of 13.6 million jobs.

Spillover effect:

As a superpower, the United States has a significant impact on the global economy.

The monetary policy enacted by the Fed will undoubtedly have spillover effects to the rest of

the world. (Yilmazkuday, 2022) looked at the spillover effects of US monetary policy on

exchange rates of 11 emerging markets and 12 advanced economies during the

pre-COVID-19 and COVID-19 periods.

Regarding the spillover effects of U.S. monetary policy during the pre-COVID-19

period, domestic exchange rates (constructed as appreciation of currencies) increased for

almost all countries represented by the year of 2019, except for Brazil, India, and Turkey. It

was implied that exchange rates of several countries appreciated through financial arbitrage

opportunities following an unexpected U.S. monetary loosening during the pre-COVID-19

period, except for certain countries with potential higher financial risk perceptions in 2019.

Regarding the spillover effects of U.S. monetary policy during the COVID-19 period,

domestic exchange rates were stable in almost all countries following a negative shock to the

federal funds rate in 2020. The only exceptions were the currencies of China and New

Zealand that appreciated following a negative shock to the federal funds rate during the

COVID-19 period.

Overall, the results imply that the unexpected shocks to federal funds rates were not

effective on the exchange rates of several countries during the COVID-19 period, which

contrasts with the results based on the pre-COVID-19 period. Therefore, the unforeseen

COVID-19 crisis in fact disturbed and modified the behavior of investors in the global

financial markets. China and New Zealand were the only countries whose currencies

appreciated following a negative shock to the federal funds and were also the only ones in the
 45

sample that managed to keep COVID cases and deaths under control, which implies that the

effects of the COVID-19 crisis that disturbed and modified the behavior of investors, can be

avoided by keeping the pandemic under control.

6. Successes, failures and lessons:

6.1. Successes

Overall, most of the US government's economic responses to the COVID-19

pandemic were successful to varying degrees. By giving the Federal Reserve substantial

autonomy and separating fiscal and monetary policies, the U.S. government has prevented

hyperinflation (Bernanke, 2012) in its economy. In addition to the Federal Reserve’s

swiftness, decisiveness, and willingness to deploy unprecedented policies, the Fed and the

U.S. government had safeguarded the economy from collapsing. The measures taken in

response to the pandemic have also pushed the economy back to its long-run course (Sukar,

2022). During the pandemic, the Federal Reserve prevented a financial crisis by buying and

selling a variety of non-treasury assets (Bachman, n.d.), and the financial markets operated as

usual.

Monetary Policy:

In general, the government eased the monetary policy to support American

households, businesses, and the economy. In response to COVID-19, the Fed cut the federal

fund rates. Figure 1 shows the federal funds target range of the Federal Reserve between

January 2019 and July 2023. Most notably, the range was significantly reduced during the

2020-2022 period. On March 15, 2020, the Fed lowered the target range for federal fund rates

to 0 to ¼ percent. The Fed continued to keep the federal fund rates at zero lower bound

(ZLB) to counter expectations of restrained monetary policies and the economy’s

 46

deterioration, which would worsen the current situation (Curdia, 2020). This reduction helped

lower interest rates such as mortgage rates and supported spending for households and

businesses.

Figure 18: Federal funds target range (Board of Governors of the Federal Reserve

System)

The Fed also utilized the quantitative easing (QE) method in response to short-term

interest rates approaching zero and the “acute dysfunction of the Treasury and

mortgage-backed securities markets” (Sukar, 2022). It returned to purchasing enormous

amounts of securities ($700 billion), Treasury ($500 billion), and mortgage-backed securities

($200 billion). On March 23, 2020, the Fed made further purchases of treasury securities and

agency “in the amount needed” to support the market and ensure effective deployment of

monetary policy to the overall financial conditions (Board of Governors of the Federal

Reserve System, 2020). Additionally, the Fed successfully conducted Repurchase Operations

(Repos) to ensure that the federal fund rate does not exceed its upper bound. Between March

2020 and May 2020, the Fed made $1 trillion in overnight Repos available in daily auctions

(Cachanosky et al., 2021). The successes of Repurchase Operations and security purchases

led to a skyrocketing increase in the Fed’s balance sheet. Figure 2 shows a leap from $3.8
 47

trillion in June 2019 to approximately $7 trillion in June 2020. The Fed balance sheet peaked

at about $8.965 trillion on April 13 2022.

Figure 19: Federal Reserve balance sheet (Board of Governors of the Federal

Reserve System)

Fiscal Policy:

The U.S. government administered an enormous fiscal response of $5.2 trillion

(Romer, 2021) to the COVID-19 pandemic. This amounted to approximately 25% of the U.S.

Gross Domestic Product in the first quarter of 2020, which was about $21 trillion (U.S.

Bureau of Economic Analysis, 2023). Enacted on March 27, 2020 (U.S Department of the

Treasury, 2020), the $1.7 trillion Coronavirus Aid, Relief, and Economic Security Act

(CARES Act) provided significant fiscal stimulus through a variety of channels and helped

panicking businesses endure the pandemic without massive layoffs. The CARES Act also

provided large amounts of funding to businesses and households and kept the economy from

dramatic declines. As a result, state and local revenues stabilized and recovered amidst the

pandemic (Dean, 2022).

On December 27, 2020, the Coronavirus Response and Relief Supplemental

Appropriations Act (CRRSAA) was enacted as part of the Consolidated Appropriations Act

of 2021 to allocate more fiscal funds (Oberlin College and Conservatory, 2021). By this time,
 48

the economy had already experienced significant recovery such as the unemployment rate

dropping from its peak of 14.7% to 6.7% (FRED, 2023) and the GDP returning to its

pre-pandemic condition (approximately $22 trillion).

The U.S. government’s fiscal stabilization funds, including the Paycheck Protection

Programs, helped businesses in keeping their employees and even led to searches for jobs due

to increased demand. As households received unemployment insurance compensation and

economic stimulus payments, this resulted in a personal income increase in the second

quarter of 2020 by 8% over the prior quarter and by nearly 11% over the prior year as shown

in Figure 3.

Figure 20: U.S Personal Income (U.S. Bureau of Economic Analysis)

Supporting financial markets:

In response to the sudden jump in demand for cash and liquid assets in March 2020,

the Fed lowered reserves’ interest and discount rates. The Fed additionally increased the

maturity of loans made using a discount rate to 90 days (Powell et al., 2020). As a result, the

economy saw a significant increment in the volume of discount window lending: from

approximately 40 million to about 124 billion dollars in April 2020 (Cachanosky et al.,

2021). With this change, the Fed has substantially alleviated the disruptions of credit flows to

businesses during the pandemic.

 49

In general, the US government's (and the Federal Reserve’s) economic responses to

the COVID-19 pandemic were mostly successful in supporting the economy. However, there

were still many criticisms regarding the long-term effects of the US government’s aggressive

approach.

6.2. Failures

The US government's economic policies in response to the COVID-19 pandemic have

been criticized for their effectiveness and their impact on the economy. For instance, the

healthcare workforce was not adequately protected, which led to further shortages of

healthcare workers and their physical and mental distress. This issue needs to be addressed to

lower the stress of healthcare workers and retain them in the workforce (Alexander et al.,

2021).

One of the key criticisms is that the Federal Reserve's actions were not sufficient to

mitigate the economic damage caused by the pandemic. The Federal Reserve took steps to

ensure that credit continued to flow to households and businesses, preventing financial

market disruptions from intensifying the economic damage. However, the severity of the

COVID-19 recession and the disruption of flows of credit across other financial markets

made these measures insufficient. The Federal Reserve intervened directly in the markets for

corporate and municipal debt to ensure that key economic actors could raise funds to pay

workers and avoid bankruptcies. Banks also needed support to keep credit flowing. When

financial markets are clogged, firms tend to draw on bank lines of credit, which can lead

banks to pull back on lending or selling Treasury and other securities. The Federal Reserve

supplied unlimited liquidity to financial institutions so they could meet credit drawdowns and

make new loans to businesses and households feeling financial strains (Liang et al., 2022).

Another criticism is that the fiscal response to the pandemic has likely discouraged

future spending on other pressing needs. The enormous $5.2 trillion U.S. fiscal response to
 50

the COVID-19 pandemic likely has put the economy on a path to recovery, but it may end up

discouraging future spending on other pressing needs, such as climate change, crumbling

infrastructure, and persistent poverty. Some federal spending was misguided. Although direct

payments (up to $1,200 per person followed by $600 and $1,400) surely gave many

households a much-needed boost at a difficult time, Most of the money went to people who

had not been economically harmed by the pandemic (Gabriela Goodman, 2022).

Furthermore, there are criticisms about the distribution of the American Rescue Plan

dollars. Local governments have committed the bulk of their American Rescue Plan dollars,

which may not have been the most effective use of the funds (Liang et al., 2022).

6.3. Lessons

Speed and Flexibility are Crucial:

Quick and flexible policy responses are essential during a crisis. The rapid enactment

of legislation such as the CARES Act and subsequent relief measures demonstrated the

importance of swift action to address the economic impact of the pandemic.

Targeted Assistance is Needed:

Providing targeted assistance to individuals, businesses, and sectors most affected by

the pandemic is crucial. The government implemented measures such as direct payments,

expanded unemployment benefits, and support for small businesses to address specific needs.

Coordination Between Fiscal and Monetary Policy

A coordinated approach between fiscal and monetary policy is effective in providing a

comprehensive response. The Fed's ability to lower interest rates and inject liquidity into the

financial system was crucial in preventing financial market disruptions, while the

government's ability to borrow and provide direct support to firms and states was essential in

protecting households, businesses, and state and local governments from the economic effects

of the pandemic (Pingle, 2023).

 51

Adaptability in Policy Design

The ability to adapt policies based on evolving circumstances is crucial. For instance,

policymakers adjusted the Paycheck Protection Program (PPP) and other relief measures in

response to feedback and changing economic conditions.

​ Investment in Public Health is Economic Policy

The pandemic highlighted the interconnectedness of public health and economic

well-being. Investing in public health infrastructure, including testing, vaccination, and

healthcare, is essential for mitigating the economic impact of a health crisis.

​ Digital Infrastructure is Critical

The ability to disburse funds efficiently and reach individuals and businesses requires

robust digital infrastructure. Lessons from the pandemic include the importance of digital

systems in implementing and managing relief programs.

​ Consideration of Long-Term Consequences

However, it's also important to note that while these policies were effective in the

short term, they also resulted in a significant increase in federal debt. Therefore, it's crucial

for policymakers to consider the long-term implications of these policies, including the

potential impact on interest rates, future fiscal challenges and inflation, balancing the need for

immediate relief with long-term economic stability (Pingle, 2023).

​ Inclusivity in Policy Design

Ensuring inclusivity in policy design is crucial to address disparities in the impact of

the crisis. Policies should be mindful of vulnerable populations and businesses that may face

unique challenges.

​ Preparedness for Future Crises

The pandemic underscores the importance of being prepared for unforeseen crises.

Policymakers may need to consider building resilience into economic systems and
 52

developing contingency plans for future emergencies. Furthermore, while these policies were

effective in the short term, they were not sufficient on their own to prevent a recession. The

core problem the economy faced was not a lack of liquidity, but a temporary halt of activity

due to health restrictions and a fundamental question of solvency for many firms and

individuals. Therefore, future responses to crises may need to consider additional measures,

such as direct spending and transfers from the government, to fill the gap of reduced

expenditures (Galston et al., 2022).

 53

7. References

Alexander, M. et al. (2021) United States response to the COVID-19 pandemic,

January–November 2020: Health Economics, policy and law, Cambridge Core.

Available at:

https://www.cambridge.org/core/journals/health-economics-policy-and-law/article/unit

ed-states-response-to-the-covid19-pandemic-januarynovember-2020/CB5A8855D670

AB488975FFAEAE6C2A43 (Accessed: 04 December 2023).

Amadeo, K. (2022) Contractionary fiscal policy: Definition, purpose, examples, The Balance.

Available at:

https://www.thebalancemoney.com/contractionary-fiscal-policy-definition-purpose-exa

mples-3305791 (Accessed: 04 December 2023).

Autor, D. et al. (2022) AN EVALUATION OF THE PAYCHECK PROTECTION

PROGRAM USING ADMINISTRATIVE PAYROLL MICRODATA, NBER

WORKING PAPER SERIES. Available at:

https://www.nber.org/system/files/working_papers/w29972/w29972.pdf (Accessed: 04

December 2023).

Bachman, D. (n.d.). Federal Reserve monetary policy in the time of COVID-19 The Fed has

done what it can. Now it’s up to the rest of government. [online] Available at:

https://www2.deloitte.com/content/dam/insights/us/articles/6787_di_ibtn-federal-reserv

e-monetary-policy/6787_DI_IBTN-Federal-Reserve-monetary-policy.pdf.

Ball, L.M., Leigh, D. and Mishra, P. (2022) UNDERSTANDING U.S. INFLATION

DURING THE COVID ERA, NBER WORKING PAPER SERIES. Available at:
 54

https://www.nber.org/system/files/working_papers/w30613/w30613.pdf (Accessed: 04

December 2023).

Bernanke, B. and Blanchard, O. (2023) What caused the U.S. pandemic-era inflation? -

Brookings, Hutchins Center Working Paper . Available at:

https://www.brookings.edu/wp-content/uploads/2023/06/WP86-Bernanke-Blanchard_6

.13.23.pdf (Accessed: 04 December 2023).

Bernanke, B.S. (2012) Speech by chairman Bernanke on monetary policy since the onset of

the crisis, Board of Governors of the Federal Reserve System. Available at:

https://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm

(Accessed: 04 December 2023).

Board of Governors of the Federal Reserve System (US). Federal Funds Target Range -

Upper Limit. [online] FRED, Federal Reserve Bank of St. Louis. Available at:

https://fred.stlouisfed.org/series/DFEDTARU#.

Board of Governors of the Federal Reserve System. (2020). Federal Reserve announces

extensive new measures to support the economy. [online] Available at:

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm.

Board of Governors of the Federal Reserve System (US). Assets: Total Assets: Total Assets

(Less Eliminations from Consolidation): Wednesday Level. [online] FRED, Federal

Reserve Bank of St. Louis. Available at: https://fred.stlouisfed.org/series/WALCL#.

Brown, G. and Ozoguz, A. (2020) Who cares? assessing the impact of The Cares Act, Frank

Hawkins Kenan Institute of Private Enterprise. Available at:

https://kenaninstitute.unc.edu/kenan-insight/who-cares-assessing-the-impact-of-the-car

es-act/ (Accessed: 03 December 2023).

Cachanosky, N. et al. (2021) ‘The Federal Reserve’s response to the COVID-19 contraction:

An initial appraisal’, SSRN Electronic Journal [Preprint]. doi:10.2139/ssrn.3726345.

 55

Centers for Disease Control and Prevention (2023a) CDC Museum Covid-19 Timeline,

Centers for Disease Control and Prevention. Available at:

https://www.cdc.gov/museum/timeline/covid19.html (Accessed: 06 December 2023).

Centers for Disease Control and Prevention (2023b) End of the federal COVID-19 public

health emergency (PHE) declaration, Centers for Disease Control and Prevention.

Available at: https://www.cdc.gov/coronavirus/2019-ncov/your-health/end-of-phe.html

(Accessed: 06 December 2023).

CBPP (2022) Robust covid relief achieved historic gains against poverty and hardship,

bolstered economy, Center on Budget and Policy Priorities. Available at:

https://www.cbpp.org/research/poverty-and-inequality/robust-covid-relief-achieved-hist

oric-gains-against-poverty-and (Accessed: 04 December 2023).

CBPP (2023) Chart book: Tracking the recovery from the pandemic recession, Center on

Budget and Policy Priorities. Available at:

https://www.cbpp.org/research/economy/tracking-the-recovery-from-the-pandemic-rec

ession (Accessed: 06 December 2023).

Chudik, A., Mohaddes, K. and Raissi, M. (2021) Covid-19 fiscal support and its effectiveness

, Economics Letters, 205, p. 109939. doi:10.1016/j.econlet.2021.109939.

Chowdhury, S.D., McAuley, N. and Walton, A. (2021) International comparisons of GDP

during the coronavirus (COVID-19) pandemic, International comparisons of GDP

during the coronavirus (COVID-19) pandemic - Office for National Statistics.

Available at:

https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/internationalcompa

risonsofgdpduringthecoronaviruscovid19pandemic/2021-02-01 (Accessed: 05

December 2023).
 56

Curdia V, 2020. Mitigating COVID-19 effects with conventional monetary policy, Federal

Reserve Bank of San Francisco, Economic Letter, April 13, 2020.

https://www.frbsf.org/wp-content/uploads/sites/4/el2020-09.pdf.

Dean, P. (2022). The Unprecedented Federal Fiscal Policy Response to the COVID-19

Pandemic and Its Impact on State Budgets. California Journal of Politics and Policy,

14(1). doi:https://doi.org/10.5070/p2cjpp14157320.

Dinerstein, M. and Huntley, J. (2020) The Long-Run Fiscal and Economic Effects of the

CARES Act, Penn Wharton Budget Model. Available at:

https://budgetmodel.wharton.upenn.edu/issues/2020/5/5/long-run-economic-effects-of-

cares-act (Accessed: 03 December 2023).

Economic impact payments (2023) U.S. Department of the Treasury. Available at:

https://home.treasury.gov/policy-issues/coronavirus/assistance-for-american-families-a

nd-workers/economic-impact-payments (Accessed: 04 December 2023).

E-commerce in the time of Covid-19 - OECD (2020a) OECD. Available at:

https://www.oecd.org/coronavirus/policy-responses/e-commerce-in-the-time-of-covid-1

9-3a2b78e8/ (Accessed: 05 December 2023).

Feldkircher, M., Huber, F. and Pfarrhofer, M. (2021) Measuring the effectiveness of US

monetary policy during the COVID-19 recession, Scottish journal of political economy.

Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8014274/ (Accessed: 04

December 2023).

FRED (2023). Unemployment Rate. [online] Stlouisfed.org. Available at:

https://fred.stlouisfed.org/series/UNRATE.

Gabriela Goodman, T.W. (2022) The fiscal policy response to the pandemic, Brookings.

Available at:
 57

https://www.brookings.edu/articles/the-fiscal-policy-response-to-the-pandemic/

(Accessed: 04 December 2023).

Gabriela Goodman, T.W. (2022) How pandemic-era fiscal policy affects the level of GDP,

Brookings. Available at:

https://www.brookings.edu/articles/how-pandemic-era-fiscal-policy-affects-the-level-of

-gdp/ (Accessed: 04 December 2023).

Galston, W.A., Darrell M. West, N.T.L. and Wessel, D. (2022) Covid-19 and the US

Economy: FAQ on the Economic Impact & Policy response, Brookings. Available at:

https://www.brookings.edu/articles/covid-19-and-the-u-s-economy-faq-on-the-economi

c-impact-policy-response/ (Accessed: 04 December 2023).

Greene, J. (2020) Amazon now employs more than 1 million people - The Washington Post,

The Washington Post. Available at:

https://www.washingtonpost.com/technology/2020/10/29/amazon-hiring-pandemic-holi

days/ (Accessed: 05 December 2023).

Groshen, E.L. (2020) Covid-19’s impact on the U.S. labor market as of September 2020,

Business economics (Cleveland, Ohio). Available at:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7661819/.

Hayes, A. (no date) All about fiscal policy: What it is, why it matters, and examples,

Investopedia. Available at: https://www.investopedia.com/terms/f/fiscalpolicy.asp

(Accessed: 04 December 2023).

H.R. 1319 (117th): American rescue plan act of 2021 (no date) GovTrack.us. Available at:

https://www.govtrack.us/congress/bills/117/hr1319/summary (Accessed: 04 December

2023).

Inflation, consumer prices for the United States (2023) FRED. Available at:

https://fred.stlouisfed.org/series/FPCPITOTLZGUSA# (Accessed: 04 December 2023).

 58

Kaplan, G., Moll, B. and Violante, G.L. (2020) The impact of The Cares Act on Economic

Welfare, BFI. Available at:

https://bfi.uchicago.edu/insight/research-summary/cares-impact-on-welfare/ (Accessed:

03 December 2023).

Kellie Moss, L.D. (2020) The families first coronavirus response act: Summary of key

provisions, KFF. Available at:

https://www.kff.org/coronavirus-covid-19/issue-brief/the-families-first-coronavirus-res

ponse-act-summary-of-key-provisions/ (Accessed: 04 December 2023).

Klein, A., Smith, E. (2021). Explaining the Economic Impact of COVID-19: Core Industries

and the Hispanic Workforce. 1-18. Available at:

https://digitalscholarship.unlv.edu/brookings_policybriefs_reports/2.

Liang, N. et al. (2022a) What did the Fed do in response to the COVID-19 crisis?, Brookings.

Available at: https://www.brookings.edu/articles/fed-response-to-covid19/ (Accessed:

04 December 2023).

Louise Sheiner, S.C., Manuel Alcalá Kovalski, L.S. and Gabriela Goodman, T.W. (2022)

How pandemic-era fiscal policy affects the level of GDP, Brookings. Available at:

https://www.brookings.edu/articles/how-pandemic-era-fiscal-policy-affects-the-level-of

-gdp/ (Accessed: 04 December 2023).

Mje (2022) The economic impact of the COVID-19 pandemic on the United States, Michigan

Journal of Economics. Available at:

https://sites.lsa.umich.edu/mje/2022/01/09/the-economic-impact-of-the-covid-19-pande

mic-on-the-united-states/ (Accessed: 05 December 2023).

McKibbin, W.J. and Fernando, R. (2020) The global macroeconomic impacts of covid-19:

Seven scenarios, SSRN. Available at:

 59

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3547729 (Accessed: 04 December

2023).

Monetary policy response to COVID-19’, Management and Economics Research Journal,

8(2), pp. 1–6. doi:10.18639/merj.2022.1557092.

Oberlin College and Conservatory. (2021). Coronavirus Response and Relief Supplemental

Appropriations Act (CRRSAA), HEERF II and ARP/HEERF III. [online] Available at:

https://www.oberlin.edu/financial-aid/crrsaa [Accessed 4 Dec. 2023].

Pingle, R.B. and J. (2023) Lessons learned from monetary and fiscal policy during

COVID-19, Brookings. Available at:

https://www.brookings.edu/articles/lessons-learned-from-monetary-and-fiscal-policy-d

uring-covid-19/ (Accessed: 04 December 2023).

Popli, N. (2022) How raising interest rates helps fight inflation, Time. Available at:

https://time.com/6227633/inflation-federal-reserve-interest-rates/ (Accessed: 05

December 2023).

Powell, J. et al. (2020). Minutes of the Federal Open Market Committee. [online] Available

at:

https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20200315.pdf?mod=

article%5C_inline [Accessed 4 Dec. 2023].

Probasco, J. (no date) Families first coronavirus response act (FFCRA) overview,

Investopedia. Available at:

https://www.investopedia.com/what-is-the-families-first-coronavirus-response-act-4802

576 (Accessed: 04 December 2023).

Real gross domestic product (2023) FRED. Available at:

https://fred.stlouisfed.org/series/GDPC1# (Accessed: 04 December 2023).

 60

Romer, Christina D. (2021) The fiscal policy response to the pandemic, Brookings. Available

at: https://www.brookings.edu/articles/the-fiscal-policy-response-to-the-pandemic/

(Accessed: 04 December 2023).

Rugaber, C. (2023) US inflation has steadily cooled. getting it down to the Fed’s target rate

will be the toughest mile, AP News. Available at:

https://apnews.com/article/inflation-prices-costs-economy-federal-reserve-rates-671494

84e11abd8d0d18e0fdd69ec256 (Accessed: 04 December 2023).

Ryan, P. (2022) The Unprecedented Federal Fiscal Policy Response to the COVID-19

Pandemic and Its Impact on State Budgets. California Journal of Politics and Policy,

14(1). doi:https://doi.org/10.5070/p2cjpp14157320.

Sheiner, L., Manuel Alcalá Kovalski, L.S., & Goodman, T.W. (2022) How pandemic-era

fiscal policy affects the level of GDP, Brookings. Available at:

https://www.brookings.edu/articles/how-pandemic-era-fiscal-policy-a

Sukar, A. (2022) ‘Monetary policy response to COVID-19’, Management and Economics

Research Journal, 8(2), pp. 1–6. doi:10.18639/merj.2022.1557092.

Spadafora, F. (2023) U.S. unemployment insurance through the COVID-19 crisis, Journal of

Government and Economics. Available at:

https://www.sciencedirect.com/science/article/pii/S2667319323000125#sec0015

(Accessed: 04 December 2023).

Spangler, T. (2020) Facebook to hire 10,000 workers this year, sets plans for doling out

$100m in aid to small businesses, Variety. Available at:

https://variety.com/2020/digital/news/facebook-hiring-10000-workers-small-business-g

rants-1234570018/ (Accessed: 05 December 2023).

 61

Statista Research Department (2023) Monthly inflation rate U.S. 2023, Statista. Available at:

https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/

(Accessed: 04 December 2023).

Team, T.I. (no date a) Expansionary fiscal policy: Risks and examples, Investopedia.

Available at: https://www.investopedia.com/terms/e/expansionary_policy.asp

(Accessed: 04 December 2023).

Team, T.I. (no date b) What is The cares act?, Investopedia. Available at:

https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-

4800707 (Accessed: 04 December 2023).

Team, T.I. (2023) Monetary policy meaning, types, and Tools, Investopedia. Available at:

https://www.investopedia.com/terms/m/monetarypolicy.asp (Accessed: 06 December

2023).

U.S. Bureau of Economic Analysis (2023) Gross Domestic Product. [online] Stlouisfed.org.

Available at: https://fred.stlouisfed.org/series/GDP.

U.S Department of the Treasury (2020) About the CARES Act and the Consolidated

Appropriations Act | U.S. Department of the Treasury. [online] Available at:

https://home.treasury.gov/policy-issues/coronavirus/about-the-cares-act.

U.S. Bureau of Economic Analysis. Personal Income. [online] FRED, Federal Reserve Bank

of St. Louis. Available at: https://fred.stlouisfed.org/series/PI.

Yilmazkuday, H. (2022) Covid-19 and exchange rates: Spillover effects of U.S. monetary

policy - Atlantic Economic Journal, SpringerLink. Available at:

https://link.springer.com/article/10.1007/s11293-022-09747-4 (Accessed: 04 December

2023).