The extent to which developing countries can implement quantitative easing in monetary policy during the spread of the COVID-19 pandemic

Abstract

When the economy enters the stage of economic downturn, or is hit by a financial or banking crisis, the central bank resorts to an unconventional monetary policy due to the ineffectiveness of traditional monetary policies by reducing the main interest rate through multiple tools, such as the re-discount rate, the legal reserve ratio, open market operations, and others. The resort of economic institutions and the productive sector to an unconventional monetary policy called quantitative easing, through the central bank playing the role of mediating in the credit process to compensate for the interruption of private mediation and the main advantage in the mediation of the central bank is the ease of obtaining funds through the issuance of government bonds without restrictions or risks in order to provide a means to stimulate the economy, There is another explanation for the policy of quantitative easing, which is the printing of a monetary block that has no interviews, and therefore we are in front of a monetary block from a vacuum in economic and real terms, which is raised in the economy in the event of an economic downturn through the open market process, which is fundamentally different from traditional monetary policies in terms of interviews. Cash block used, This policy, which is an unconventional monetary policy tool, is used in financial crises for urgent financial and banking rescue, in addition to returning the economic cycle to the stage of economic boom in the event the economy entered a phase of deflation, and is rarely resorted to to finance the public budget.