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

Exclusively available on IvyPanda Available only on IvyPanda

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.

We will write a custom essay on your topic a custom Essay on The State of the US Economy by the COVID-19 Pandemic
808 writers online

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.

Print
Need an custom research paper on The State of the US Economy by the COVID-19 Pandemic written from scratch by a professional specifically for you?
808 writers online
Cite This paper
Select a referencing style:

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/.

Powered by CiteTotal, essay referencing tool
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. Request the removal
More related papers
Cite
Print
1 / 1