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Monetization Of Fiscal Deficits And Covid-19: A Primer, Aidan Lawson, Greg Feldberg
Monetization Of Fiscal Deficits And Covid-19: A Primer, Aidan Lawson, Greg Feldberg
Journal of Financial Crises
Monetization—also known as “money-financed fiscal programs” or “money-printing”—occurs when a government finances itself by issuing currency or other non-interest-bearing liabilities, such as bank reserves. It poses real risks—potentially excessive inflation and encroachment on central-bank independence—and some paint it as a relic of a bygone era. The onset of the COVID-19 crisis, however, forced governments to spend heavily to combat the considerable economic and public health impacts. As government deficits climbed, monetization re-entered the conversation as a way to avoid the massive debt burdens that some nations may face. This paper describes how monetization works, provides key historical examples, and examines …
Japan's Outright Purchases Of Commercial Paper (Japan Gfc), Alec Buchholtz
Japan's Outright Purchases Of Commercial Paper (Japan Gfc), Alec Buchholtz
Journal of Financial Crises
Following the collapse of Lehman Brothers in September 2008, the global commercial paper (CP) market began to tighten as interest rates rose and investors sought more-liquid money market securities. The Bank of Japan (BOJ) introduced several operations in late 2008 to promote liquidity in the CP market. In January 2009, the BOJ began to purchase CP and asset-backed CP outright from banks and other financial institutions. The BOJ could purchase up to ¥3 trillion of CP with a residual maturity of up to three months, among other short-term securities, via 10 purchases of up to ¥300 billion each. The BOJ …