Sample Economics Paper on Federal Reserve Policies

The emergence of the COVID-19 pandemic was a threat to various global economies, including the US. As an institution, the Federal Reserve is supposed to ensure economic stability; thus, the Federal Reserve has adopted measures to protect the economy from depression. Francis, Jackson, and Owyang (2020) reveal that America had reduced unemployment levels before the outbreak. However, with the suggestions of managing COVID-19, many companies have scaled down their operations while others have closed. For this reason, it is a few people who are in employment actively. Francis, Jackson, and Owyang (2020) note that at the moment, there has been an upsurge in the persons applying for unemployment benefits. Such conditions threaten the economy because of concerns about inflation. One of the tools that the policymakers at the Federal Reserve have employed is by lowering the federal benchmark funds rate close to zero (Francis, Jackson & Owyang, 2020). Considerably, this measure is meant to ensure that the balance sheet of the Federal Reserve is doubled.

Further, the Federal Reserve has adopted measures that are meant to promote reduced lending. Also, in ensuring that the private sector sustains its operations against the demerits of COVID-19, the Federal Reserve has the CARES ACT (Coronavirus Aid Relief and Economic Security) (Gallemore, Hollander & Jacob, 2020). The role of the CARE ACT is to give credit services to the private sector. Noticeably, this is meant to protect vital businesses from collapsing because of COVID-19.

The focus of the Federal Reserve during this time of the COVID-19 pandemic has been to achieve low inflation. When many unemployed and crucial sectors of the economy are closed or have reduced their operations, this increases inflation. As such, the introduction of CARE ACT by the Federal Reserve is appropriate in promoting low inflation. Also, the nominal GDP aspect is still addressed by this CARE ACT, which is an incentive for businesses to continue producing goods and services. The focus is to ensure that there is reduced dormancy in the economy.

 

 

References

Francis, N. R., Jackson, L. E., & Owyang, M. T. (2020). How has empirical monetary policy analysis in the US changed after the financial crisis?. Economic Modelling, 84, 309-321.

Gallemore, J., Hollander, S., & Jacob, M. (2020). Who CARES? Evidence on the Corporate Tax Provisions of the Coronavirus Aid, Relief, and Economic Security Act from SEC Filings. Evidence on the Corporate Tax Provisions of the Coronavirus Aid, Relief, and Economic Security Act from SEC Filings (June 19, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper, (2020-81).