Evaluating the Effectiveness of Unconventional Monetary Policy Measures in the Global Financial Crisis and COVID- 19 Periods

Abstract

This study examines unconventional monetary policy's (UMP) efficacy on the U.S. economy during the Great Financial Crisis and the COVID-19 pandemic. Given the popularity of these policies during the recent COVID-19 pandemic, it is essential to examine how they support economic recovery. Utilising both ordinary least squares (OLS) and VAR models, the present study examined if the announcement of unconventional monetary policies helped to forestall the deterioration of the U.S. economy following the respective crisis. The study found the following using data spanning 2005 and 2023 and covering two of the most devastating crises in recent history (GFC and COVID-19). First, the announcement of UMPs during the GFC and COVID-19 pandemic did not significantly impact several macroeconomic variables in a cross-sectional context. Second, the results from the VAR model, which traces the spillover effect following the announcement, indicate that it only negatively affected industrial output, not GDP, CPI, and S&P 500 index. By evaluating research hypotheses and UMP measures' effectiveness, the study adds to the body of literature. In conclusion, our study sheds light on the complex dynamics of UMP in traversing financial crises, offering useful insights for academics, businesses, and regulators.