Page 408 - ES 2020-21_Volume-1-2 [28-01-21]

State of the Economy 2020-21: A Macro View 35

Banks, the world over, have deployed various measures to stimulate the economy through liquidity
support and regulatory changes. An unprecedented fiscal response at $11.7 trillion globally, or
close to 12 per cent of global GDP (as of September 11, 2020), has provided lifelines to vulnerable
households and firms. These measures include additional spending or forgone revenue, temporary
tax cuts, cash and in-kind transfers, unemployment benefits, wage subsidies, and liquidity support,
including loans, guarantees, and equity injections by the public sector (Figure 37).
Figure 37: Types of Fiscal Support across the Globe

Source: IMF
EMMIEs = Emerging Market and Middle-Income Economies; G20 = Group of Twenty; LIDCs
= Low-Income Developing Countries

1.42 Monetary authorities across the world have eased monetary conditions with broad-based
cuts in short-term policy rates and reserve requirements to support activity and provided
emergency liquidity support to stabilize financial markets (Figure 38). Several central banks
around the world engaged in unconventional monetary policy interventions in the form of
long-term asset purchase programs (for the first time in many EMDEs), relending facilities,
relaxation in asset provisioning requirements and supporting credit provision to a wide range
of borrowers. The corresponding injections of reserve money into the banking system have
been effective in stabilizing bond markets, reducing bond yields, boost equity prices without
putting pressure on exchange rates.
Figure 38: Trend in Global Policy Rates

7 18
AEs EMDEs (RHS)
16
6
14
5
12
Per cent 4 3 10 Per cent
8
6
2
4
1
2
0 0
Nov/2000 Nov/2001 Nov/2002 Nov/2003 Nov/2004 Nov/2005 Nov/2006 Nov/2007 Nov/2008 Nov/2009 Nov/2010 Nov/2011 Nov/2012 Nov/2013 Nov/2014 Nov/2015 Nov/2016 Nov/2017 Nov/2018 Nov/2019 Nov/2020

Source: World Bank