At the New York Fed: Implications of the Federal Reserve’s actions in response to the COVID-19 pandemic

On September 30 and October 1, 2021, the New York Fed organized a conference on the implications of the Fed’s actions in response to the COVID-19 pandemic. New York Fed Chairman John Williams gave the opening and closing remarks.

Market impact

The first session was moderated by Susan McLaughlin of the New York Fed Markets Group and focused on the market impact of the Fed’s response to the pandemic. Andy Haughwout, David Arseneau, and Or Shachar – all US Federal Reserve economists – presented research on the design and impact of Fed interventions. Andy discussed a paper on the role of Municipal liquidity facility, co-written with Ben Hyman and Or Shachar, David presented work on the Main Street Loan Program, co-written with Jose Fillat, Molly Mahar, Don Morgan and Skander Van den Heuvel, while Or focused on the Credit facilities for primary and secondary businesses, based on an article co-authored with Nina Boyarchenko, Caren Cox, Richard Crump, Andrew Danzig, Anna Kovner and Patrick Steiner. The New York Fed has also released a series of Staff reports dedicated to facilities set up in response to the pandemic.

Watch the video of the associated conference.

Financial weaknesses

The second session focused on “the fragilities of financial ecosystems revealed by the pandemic” and was moderated by Beverly Hirtle, director of research at the New York Fed. First, Marcin Kacperczyk of Imperial College London spoke about the consequences of global flows on financial stability. He also described research showing the benefits of swing price for open-ended mutual funds. Next, Arvind Krishnamurthy, from the Stanford Graduate School of Business, discussed the fragility of bond markets and the policy implications. Adair Morse, deputy assistant secretary for access to capital at the Treasury Department, followed with an overview of small business finance and the challenges for small businesses during the pandemic. Finally, Stefan Nagel, from the Booth School of Business at the University of Chicago, spoke about the upheavals that occurred in the treasury market in March 2020.

Macroeconomic impact

The third session, moderated by Andreas Lehnert, Director of the Division of Financial Stability at the Federal Reserve Board, focused on the macroeconomic impact of interventions initiated in response to the pandemic. Markus Brunnermeier, Princeton University, provided an overview of the financial dominance theory of monetary policy. Kinda Hachem, of the Darden School of Business at the University of Virginia, discussed differential trends in bank balance sheets between different sizes of banks during the pandemic. Ricardo Reis from the London School of Economics, followed with a discussion on the role of central bank swap lines and the FIMA repo facility in helping to support the US dollar as a global currency.

Lessons learned

Lorie Logan, Head of System Open Market Account (SOMA), moderated the fourth session on lessons for the future. Isabel Schnabel, Member of the Executive Board of the European Central Bank, spoke of the challenges central banks face in responding to events such as a pandemic. Hyun Song Shin, Bank for International Settlements, discussed the role of leverage in understanding threats to financial stability. Viral Acharya, from the Stern School of Business at New York University, mentioned some steps central banks could take to limit the risk posed by extreme events (for example, by limiting the leverage in the system financial and by fighting against the proliferation of outstanding debts). Finally, Thomas Philippon, from the Stern School of Business at New York University, provided some lessons from the global financial crisis and pandemic, including the importance of debt guarantees, the best way to restructure segments of the economy most affected by a shock and the benefits of decentralized shutdown decisions.

Nina Boyarchenko is a Research Officer in the Research and Statistics Group of the Federal Reserve Bank of New York.

Anna kovner is the policy leader for financial stability within the Bank’s Research and Statistics Group.

Antoine Martin is Senior Vice President of the Bank’s Research and Statistics group.

How to cite this post:
Nina Boyarchenko, Anna Kovner and Antoine Martin, “At the New York Fed: Implications of Federal Reserve Actions in Response to the COVID-19 Pandemic”, Federal Reserve Bank of New York Economy of the rue de la Liberté, October 15, 2021, 19 -pandemic.

The opinions expressed in this article are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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