Question

Compare changes in the government reations to the initial shocks to the economy during the Great Depression and the Covid19 recession.

Answer 1

Ans- For limitating both the shocks, the Government and central bank uses fiscal and monetary policy respectively in both the crisis.

The spillover effects of the GFC were related to what were later called “Global Systemic Important Banks” (G-SIB) with contagion across borders. Similarly, the COVID-19 crisis has revealed the dependence of mature economies on some inputs produced only in other countries. In both cases, there is a major comeback of the roles of the public authorities, the scope of regal powers. They were also adapted to local conditions and the type of policies.Such a formula used to preserve euro area integrity contributes to reassuring financial markets only when perceived as credible.