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Central Banks and Their Limits in a Pandemic

This chapter details the reactions of central banks to the current Covid-19 pandemic and contrasts them with their monetary policy operations during normal (non-crisis) times and their reactions to the Global Financial Crisis (GFC) of 2007-2009. It situates the response of central banks in Asia within a global context, examining and comparing the responses of central banks in the United States, the Euro area, the United Kingdom, Japan, Singapore and Hong Kong. Moreover, the chapter explains why this crisis is unprecedented, making it dangerous in terms of financial stability and state finances and difficult for central banks to return to normality. In the current crisis, central banks find themselves in an ambiguous situation. On the one hand, they are better prepared than they were thirteen years ago when the GFC erupted. On the other hand, relying on experience from the GFC comes with risks. No two crises are ever the same, and this is especially true for the Covid-19 pandemic. Financial markets and economies are not the triggers of this crisis as they were in many previous crises when central banks had to react swiftly and forcefully;instead, they have fallen victim to a calamity that paralyzes society, trade, and business globally. © the several contributors 2021.