Munich Personal RePEc Archive

COVID-19 uncertainty and monetary policy

PINSHI, Christian P. (2020): COVID-19 uncertainty and monetary policy.

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Abstract

The uncertainty of COVID-19 seriously disrupts the Congolese economy through various macroeconomic channels. This pandemic is influencing the management of monetary policy in its role as regulator of aggregate demand and guarantor of macroeconomic stability. We use a Bayesian VAR framework (BVAR) to provide an analysis of the COVID uncertainty shock on the economy and the monetary policy response. The analysis shows important conclusions. The uncertainty effect of COVID-19 hits unprecedented aggregate demand and the economy. In addition, it undermines the action of monetary policy to soften this fall in aggregate demand and curb inflation impacted by the exchange rate effect. We suggest a development of unconventional devices for a gradual recovery of the economy.

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