The Overview of ECB's and NBS' COVID-19 Containment Measures

Lazić, Milena and Antonijević, Marija (2021) The Overview of ECB's and NBS' COVID-19 Containment Measures. In: Makroekonomska stabilnost i unapređenje konkurentnosti zemalja Zapadnog Balkana. Institut ekonomskih nauka, Beograd, pp. 146-166. ISBN 978-86-89465-65-5

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Abstract

The COVID-19 influenced crisis represents an unprecedented event that has to some extent affected all segments of the economy of countries worldwide. The outburst of the contagious coronavirus and its adverse effects did not bypass the banking sector, which has consequently faced numerous challenges. Although the banking sector usually played a central role in periods of global instability, primarily as a vital part of the problem, during the ongoing pandemic, it has been perceived as a part of the solution. To strengthen the liquidity of national banking systems and ensure the smooth transmission of monetary policy measures, central banks have resorted to a wide range of conventional and unconventional measures and activities. Given the context, the chapter aims to present and analyze the impact of measures ECB and NBS have undertaken to mitigate the adverse effects of the crisis triggered by the outburst of the contagious coronavirus. Research results indicate that ECB primarily resorted to injecting additional liquidity through the temporary asset purchase program (PEPP) worth 1,850 billion EUR and lowering key interest rates at historically low levels to encourage lending and reduce borrowing costs. Analogously, NBS responded to the crisis along with the first measures of the Government of the Republic of Serbia by reducing key policy rate and providing additional domestic and FX liquidity to the banking sector. By providing deeper insights into the key activities ECB and NBS have undertaken to mitigate the COVID-19 crisis adverse effects, the chapter contributes to the growing body of literature in the field of central banking and monetary policy.

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