Government Policy to Decrease the Economic Costs of Covid 19

After the emergence of COVID-19 it infected millions of people, where more than 2.5 million individuals were confirmed dead globally as of March 2021, and many were hospitalized. Many nations have prevented gatherings or social distancing measures to contain the spread of the virus and have restricted international and national travel. In addition, they ratified unprecedented lockdown measures like the closure of shops, restaurants, and schools (Chen et al., 2021). According to Krueger, Uhlig, & Xie (2020), the various containment actions had large social and health burdens together with huge economic burdens arising from both policy measures against its spread and that of COVID-19. For instance, disruptions of travel restrictions and lockdown measures resulted in demonstrably large losses in investments, output, and consumption. Chen et al. (2021) notes that, from 2020-2030, there is an expected COVID-19 economic burden of 7.7 % of 2019 GDP or 1.4 trillion dollars in the United States. One of the government policies that can decrease the COVID-19 pandemic costs while also making society better domestically and internationally is a monetary easing policy, a term funding facility.

Monetary easing refers to policies directed toward influencing the quantity of credit and money in an economy. An example of a monetary easing policy is a term funding facility. It can give stipulated year funding for acknowledged deposit-taking institutions to support credit supply. The policy is also vital in providing incentives and inducements to ADIs to increase their lending to businesses, especially medium-sized and small enterprises (SMEs) (Koeda, 2019). Institutions given the term funding facility will then give low-interest rates to businesses and citizens, thus enticing them to invest in diverse areas like the stock and housing markets. A monetary easing policy ensures money in government reserves gets in circulation without it printing more money that is unbacked by assets, thus stimulating a nation's economy. The monetary easing can also be supplemented by reducing the cash rates of interest that a nation's central bank charges other commercial institutions.

The monetary easing policy could have several benefits and costs during the pandemic economic hardship and can be a faster means of stimulating a nation's economy. One major advantage is boosting the prices of the assets. A government participating in bond buying, especially during a monetary easing, increases the bond value since the bonds are replaced by money that previous bondholders often reinvest in several assets (Cavallino & Sndri, 2020). Another advantage is encouraging people to spend since its main goal is leveling out markets to make money investing and spending more accessible and appealing to consumers. In addition, monetary easing leads to a lower risk of lending for banks due to the significant drop in interest rates (Kyriazis & Economou, 2017); as a result, economic risks for banks giving civilians money will remain minimal. Some of the disadvantages include affecting the value of a country's currency unless other nations opt to take similar measures. A drop in a nation's currency value lowers the international purchasing powers. It could also result in stagflation or a magnificent rise in the cost of living and other goods with no notable or sufficient economic growth. For example, people may need to spend their money; thus, the method fails. Monetary easing policy can also cause inflation, thus resulting in higher living costs.

A market failure results when an individual in a group eventually becomes worse off than when they would not have acted in superbly rational self-interests, thus receiving too few benefits or too many costs. Monetary easing would be a great intervention in mitigating market failures like concentrated market power. When people are encouraged to spend, monopoly is broken, and thus, many sellers will dominate a market price control difficult; thus, new competitors will join the market. Mitigating market power will positively impact consumption and production. Government intervention would be better because it would address market inefficiencies. The policy will ensure that resources are efficiently provided to those requiring them. For example, providing SMEs with loans with small interests or funding them will improve the market during an economic crisis. Government intervention will also help provide income equality, thus achieving macroeconomic goals, protecting consumers, spurring and securing the domestic economy, and redistributing wealth and income.