The State of the US Economy by the COVID-19 Pandemic Essay

Exclusively available on Available only on IvyPanda® Made by Human No AI

The article under review is titled “How to Pay for the (Pandemic) War.” It was written by Francesco Bianchi, Renato Faccini, and Leonardo Melosi and published by the Centre for Economic Policy Research (CEPR) on 13 May 2020. The article examines the challenges that fiscal authorities face during the COVID-19 pandemic and proposes “a coordinated policy strategy aiming at creating a controlled rise of inflation and an increase in fiscal space” (Bianchi et al.). The group of authors includes Francesco Bianchi, Associate Professor of Economics at Duke University, Renato Faccini, Senior Research Economist at the Danmarks Nationalbank, and Leonardo Melosi, Senior Economist at the Federal Reserve Bank of Chicago.

The purpose of the article in question is to inform the reader about the current state of the US economy and a challenging fiscal situation at the times of the recession caused by the COVID-19 pandemic. According to the researchers, the fiscal stimulus of $2.6 trillion and the restrictive government policy due to the public health crisis might reduce the efficacy of fiscal interventions (Bianchi et al.). The article attempts to resolve the issue of the low-interest rates and high debt by proposing a potentially effective policy strategy involving the introduction of an emergency budget by the fiscal authorities. The position of the authors concerning the issue is focused on the need for a coordinated strategy between the fiscal and monetary authorities to stabilize the public debt and correct below-target inflation.

Bianchi et al. argue that Franklin Roosevelt’s New Deal has similarities with their approach to fiscal and monetary policy. President Roosevelt supported the division into a regular federal budget and an emergency budget, which is consistent with Keynesian economic theory named after the economist John Maynard Keynes. The theory was first proposed during the Great Depression of the 1930s and aimed at solving the financial problems in the short run (Jahan). Thus, the article is based on Keynesian economics and introduces the emergency budget into a “state-of-the-art new-Keynesian dynamic general equilibrium model,” which is especially relevant during recessions such as the one caused by the COVID-19 crisis (Bianchi et al.). The co-existence of the two budgets (regular and emergency) and the cooperation between the two authorities (fiscal and monetary) might help to stabilize the economy by regulating the dynamics of key macroeconomic aggregates (GDP, inflation rate, nominal interest rate) as demonstrated by the figures included in the article. The proposition might be implemented through a temporary rise of inflation by the Federal Reserve and the fiscal interventions to an emergency budget by the fiscal authorities.

Overall, the information which the authors provide is sufficient to back up their proposition since they base their research on the improved version of the existing Keynesian economic theory, which was successfully employed during the Great Depression. Additionally, the researchers use figures to illustrate the differences in the dynamics of key macroeconomic aggregators in either the fiscal orthodoxy or the emergency budget. The article’s main objective was to analyze a coordinated fiscal and monetary strategy involving a temporary rise of inflation and an increased fiscal space during the COVID-19 outbreak. The objective was met as the figures proved the efficiency of the proposed strategy compared to the fiscal orthodoxy. Thus, the article might serve as a reliable source of knowledge for the policymakers since it presents the information in a concise, but effective way and combines the critical analysis with potential scenarios.

Works Cited

Bianchi, Francesco, et al. “How to Pay for the (Pandemic) War.” CEPR Policy Portal, 2020, Web.

Jahan, Sarwat, et al. “What is Keynesian Economics?” Finance & Development, vol. 51, no. 3, 2014, Web.

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2022, February 21). The State of the US Economy by the COVID-19 Pandemic. https://ivypanda.com/essays/the-state-of-the-us-economy-by-the-covid-19-pandemic/

Work Cited

"The State of the US Economy by the COVID-19 Pandemic." IvyPanda, 21 Feb. 2022, ivypanda.com/essays/the-state-of-the-us-economy-by-the-covid-19-pandemic/.

References

IvyPanda. (2022) 'The State of the US Economy by the COVID-19 Pandemic'. 21 February.

References

IvyPanda. 2022. "The State of the US Economy by the COVID-19 Pandemic." February 21, 2022. https://ivypanda.com/essays/the-state-of-the-us-economy-by-the-covid-19-pandemic/.

1. IvyPanda. "The State of the US Economy by the COVID-19 Pandemic." February 21, 2022. https://ivypanda.com/essays/the-state-of-the-us-economy-by-the-covid-19-pandemic/.


Bibliography


IvyPanda. "The State of the US Economy by the COVID-19 Pandemic." February 21, 2022. https://ivypanda.com/essays/the-state-of-the-us-economy-by-the-covid-19-pandemic/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1