







































96 

 

Finance, Accounting and Business Analysis 
Volume 3 Issue 2, 2021 

http://faba.bg 

Comparative Study of Major Central Bank’s Monetary Policy in 

Response to the Pandemic Crisis 

Gergana Mihaylova-Borisova*  

Finance Department, University of National and World Economy, Bulgaria 

Info Articles  
 

Abstract 

Keywords:  
Central Bank, Monetary Policy, Key 

Objectives, Euro Area, USA. 

 
Objective: The study aims to investigate the policy, performed by the main central 

banks during the crisis, related to spread of the COVID-19 crisis all over the world. 
The Central bank’s policy was one of the key policies for the countries to counter 
the negative effects, from the coming new crisis. The crisis is different in character 
from the previous global crisis in 2009 and it is characterized with higher negative 
impacts on the economic activity and unemployment of the countries.  

Methodology: The study examines the monetary policy tools used by the major 

central banks in particular the FR (Federal Reserve), the European central bank, the 
BoE (Bank of England) during the COVID-19 crisis. The data used are the official 
one, published by the Eurostat, European central bank, Federal Reserve, OECD. 
Through the methods of analysis and synthesis the effectiveness of the monetary 

policy, done by the covered central banks, is investigated. The data used are for the 
period 2007-2021. 

Results: The analyses indicate that the Bank of England, as well as the FR was in 

more privileged terms than the European central bank (ECB) before the COVID-19 
crisis. Their main interest rates were positive and these banks could apply 

conventional instruments of policy at the beginning of the crisis before conducting 
the nonconventional policy tools. 

Implication: The study’s results are beneficial for central banks for countering the 
negative effects of the COVID-19 crisis, turning to the deep economic crisis 
afterward. 

 

  

   

*Address Correspondence:   
E-mail: gmihaylova-borisova@unwe.bg 
 

 

 

 



Finance, Accounting and Business Analysis 3 (2) 2021 

97 

 

INTRODUCTION 

 
The world has been hit by a new type of crisis, the so-called pandemic crisis, linked to the 

distribution of a new virus, the coronavirus Covid-19. This was after a series of turbulences starting with 

the global crisis on financial markets in 2008. Because they have been significantly affected by the 

turbulence, some countries, or areas have been unable to recover fully before the new crisis emerges in 
2020. Countries are experiencing moderate rates of economic growth just before the coronavirus emerges 

in 2020. In 2019, the EA’s economic growth is 1.5%, while in the UK (United Kingdom) and United 

States of America (USA) it is 1.4% and 2.2% respectively.  
In these conditions, the role of central banks remains prominent, as they could act expansionary 

with their instruments in order to recover economies from another crisis. Of course, fiscal policy also 

contributes to the achievement of the ultimate objectives of economic policy, but insofar as for some 

countries the possibilities of government response are limited, the active intervention of the banks is also 
necessary. 

The study aims is to examine the monetary policy pursued by major central banks during the 

pandemic crisis associated with the widespread of the COVID-19 worldwide. Monetary policy is one of 
the key policies in countries to counter the negative effects coming from the new crisis. The crisis is 

different from the previous global financial crisis in 2008, but is characterized by stronger negative effects 

on economic development and unemployment. 

The thesis defended in the study is that the central banks, in particular the Bank of England (BoE) 
and the Federal Reserve (FR), undertook swift action to counter the new pandemic crisis, avoiding a 

significant deterioration in their economic performance and showing economic agents that they are willing 

to use all tools to reach their objectives. This is also thanks to their more privileged position because their 
main interest levels (rates) are at higher level than the rates of the ECB, which are zero and some of which 

are even on a negative trajectory.  

The study examines the tools of policy implemented by major central banks: the FR, the BoE and 

the ECB during the pandemic crisis. The data used are official one and have been released by the OECD, 
the ECB, the FR, and the BoE. The methods of analysis and synthesis are used to examine the 

effectiveness of the bank’s policy. The data used are for the period 2007-2021. 

There are individual studies on the instruments implemented by specific central banks worldwide, 

but no studies have been conducted that focus on a comparative analysis of the instruments undertaken 
and their effectiveness and efficiency. This study contributes to the economics literature in two ways: first, 

it provides a comparative analysis of the measures taken by leading central banks in relation to the 

coronavirus outbreak in the respective country; second, it assesses the efficiency of the three leading central 
bank’s policy on the macroeconomic indicators in particular the economic growth, inflation and 

unemployment, again emphasizing comparative analysis. 

The study consists of the following parts: the first one outlines the relevance and objectives of the 

study, and thesis being defended. The second part reviews the literature as well as the research methods 
and data used for the purpose of proving the thesis. In the next part, the monetary policy tools of the 

leading banks, the BoE, ECB and FR are presented. The fourth part analyses the results of the tools used 

by providing a comparative analysis of the activity of the central banks in the EA, USA and UK in respect 
to macroeconomic performance and the meeting the objectives. In the last part, the main conclusions are 

presented. 

 

LITERATURE REVIEW 

 
There are studies in the economic literature that have focused on the unconventional monetary 

policies of leading central banks in response to the global crisis in 2008. The nonconventional monetary 

policy instruments that were introduced to counteract to the global crisis in 2008 have been studied in 
detail, as well as their impact on the ECB’s monetary policy (Mihaylova-Borisova, 2014; Mihaylova-

Borisova, 2016; Mihaylova-Borisova, 2018; Mihaylova-Borisova, 2020; Trifonova, Trifonova, 2016; Cour-

Thimann, Winkler, 2013; Giannone et all, 2011; Smaghi, 2009; Szczerbowicz, 2015; Trichet, 2013;). 

Among these studies, those that analyse the advantages and disadvantages of applying one or several 
instruments are distinguished. For example, Mihaylova-Borisova (2018) examines the effects of negative 

interest levels introduced by the ECB in mid-2014, and Szczerbowicz (2015) studies quantitative easing 

associated with the purchase of certain assets by the ECB. The Federal Reserve's unconventional monetary 
policy is studied by Rudebusch (2018), Bank for International Settlements (2019), Neely et all (2021). 

Bank for International Settlements (2019) provides a comparative study of unconventional policy 

implemented by central banks since the global crisis, excluding measures implemented by central banks to 

counteract to the pandemic crisis. It examines the types of unconventional measures and provides 



Finance, Accounting and Business Analysis 3 (2) 2021 

98 

 

guidance on when these instruments should be applied and how often, i.e. it seeks to draw lessons from the 
measures applied in response to crises. 

 Neely et all. (2021) also analyse the measures applied by the central banks in particular the FR, 

the BoE, the ECB, etc. The aim of their study is to track how central banks change their unconventional 

monetary policy to promote economic activity and maintain price stability over the period 2013 to 2019. 
The study traces in detail how central banks manage to cope with the challenges they face, while also 

trying to take into account the structural features of their economies. 

 Among the published studies on central banks' monetary policy during the COVID-19 crisis, 
most of them focus on a separate investigation of the measures implemented by a specific central bank to 

respond to the coronavirus crisis (Mihailova-Borisova, 2020; Clarida et all, 2021). There is also 

comparative research on the performance of specific banks' measures to react to the COVID-19 crisis at its 

initial emergence (Center for Economic Policy Research, 2021). No comparative studies are found on the 
impact of measures implemented by leading central banks to respond to the pandemic crisis.  

 

METHODS  

 

To study the impact of monetary policy tools used by the leading banks such as the FR, BoE and 

ECB, the methods of analysis and synthesis are used. 
Data for the period 2007-2021 is used to analyse the effectiveness of monetary policy implemented 

by the leading central banks. The aim is to present the state of the studied indicators such as economic 

growth, inflation, unemployment before the occurrence of the pandemic crisis, which in turn is to be 
compared with the state of these main macroeconomic indicators after the emergence of the crisis until 

today. 

The statistical information used has been published officially by the OECD, the ECB, FR and 

BoE. 
 

 Monetary Policy of Major Central Banks during the Pandemic Crisis 

 

This part of the study examines the measures taken by leading central banks in response to the 
development and expansion of the pandemic crisis associated with the spread of the coronavirus.   

 

Monetary policy of the Federal Reserve 

Despite the good outlook for the U.S. economy in the beginning of 2020, the FR is relying on 

"forward guidance" to communicate to the public that "the coronavirus poses possible risks to economic 
activity" (Federal Reserve, 2020a). Thus, the FR was already declaring its willingness to act with the 

available tools before the pandemic crisis spread. On March 3, 2020, to counteract to the growing risks of 

contagion, the FR decided to reduce the federal funds rate by 50 basis points to a range of 1-1.25%, 

respectively (Federal Reserve, 2020b). An argument in favour of the use of this instrument is the 
achievement of the set objective of price stability and maximum employment and. With these actions, the 

FR is ahead of the other two banks, stating its serious intention to neutralise the negative effects of the 

COVID-19 crisis on the country's economic development and to realise the objectives. In doing so, the 
Federal Reserve is demonstrating resolve and timely action to address the uncertain situation surrounding 

the expansion of the pandemic crisis.  

Ten days later (March 13, 2020), President Donald Trump declares a state of emergency in the 

USA, which, together with the fast spread of the virus, causes economic agents to act in panic and stock 
up, emptying stores. These actions are forcing the central bank to intervene again, as it is clear that the 

economy will be negatively affected.  

The Federal Reserve is taking another cut in the federal funds rate on March 15, 2020, but this 
time by as much as 1 percentage point to a range of 0%-0.25% (Federal Reserve (FR), 2020c). The central 

bank firmly states that it is ready to maintain this range until the moment when it can achieve its goals of 

maximum employment and price stability - achieving the symmetric target of 2%. In addition to this 

traditional monetary policy tool, the Federal Reserve is also taking additional actions to purchase of at 
least 500 billion dollars of securities and at least 200 billion dollars of mortgage-backed securities. These 

additional actions are being taken to ensure the smooth functioning of the Treasury securities market and 

to ensure the continued flow of loans to households and businesses. The Federal Reserve is also 
introducing new weekly repo operations to maintain and eliminate problems in the functioning of financial 

markets. 

On March 15, 2020, the Federal Reserve also cut the discount window rate by 150 basis points to 

0.25% (Federal Reserve, 2020d). This measure is taken to meet the liquidity needs of banks. The duration 
of the lending period is also increased to 90 days. The Federal Reserve is also encouraging banks that have 



Finance, Accounting and Business Analysis 3 (1) 2021 

99 

 

built up liquidity and capital buffers to use them as they lend resources to businesses and households that 
are affected by the COVID-19 crisis - conditions considered unforeseen and adverse.  

In order to maintain and facilitate the flow of dollars into the financial markets internationally, the 

FR improved the terms of swap lines with some central banks, such as the central bank of Canada, BoE, 

Bank of Japan, the ECB and the central bank of Swiss central bank  
The actions presented by the FR display that it is taking swift and far-reaching action for the 

purpose of limiting the negative impacts on the economy as a result of the COVID-19 virus. These large-

scale actions are in all areas important to the Federal Reserve, including: actions to reduce interest rates, 
provide liquidity and better funding opportunities for banks, help credit reach households and businesses 

more easily, and bank regulations and initiatives. 

Following these large-scale actions on a number of areas, on March 17, 2020, the Federal Reserve 

is also moving to introduce additional mechanisms to help the flow of resources to economic agents. 
Several facilities have been introduced including:  

1/Commercial Paper Funding (CPFF) (Federal Reserve, 2020e). Various economic activities are directly 

financed through the commercial paper market. The Federal Reserve seeks, through the provision of 
credit, to support businesses, households, and jobs in the economy. The facility is intended to ensure 

liquidity protection to issuers of commercial paper. To this end, special purpose vehicles (SPVs) operate to 

purchase A1/P1 rated unsecured and asset-backed commercial paper from issuing companies. 

2/Primary Dealer Credit (PDCF) (Federal Reserve, 2020f). Under this facility, the Federal Reserve 
provides overnight and term funding to primary dealers of priced securities. The facility can be 

collateralized by a broad range of investment-grade debt instruments, such as commercial paper and 

municipal bonds, as well as equities. Financing can be for a term of up to 90 days.  
3/ Money Market Mutual Fund Liquidity  (MMLF) (Federal Reserve, 2020g). Under this facility, the 

Federal Reserve announces rules under which financial institutions can benefit from the liquidity support 

offered by the central bank. The facility is intended to improve liquidity and the sound functioning of the 

money market, as well as to help the economy.  
On March 19, 2020, the Federal Reserve also introduces new swap lines with nine other central 

banks. Swap lines for not more than USD 60 billion are being negotiated with the banks of Brazil, Mexico, 

Sweden, South Korea, Singapore and Australia, and lines of up to USD 30 billion are being negotiated 
with the central banks of New Zealand, Norway and Denmark (Federal Reserve, 2020h).  

With the spread of the coronavirus comes a second series of large-scale actions by the Federal 

Reserve on March 23, 2020. On that date, the Federal Reserve commits to unlimited bond buying i.e. "in 

the amounts needed" (Federal Reserve, 2020i) for the purpose of maintaining the smooth functioning of 
the government securities markets and the mortgage-based securities markets.  

In addition, the Federal Reserve is introducing a new program to provide up to USD 300 billion 

in funding to support credit growth to employers, businesses, and consumers. Three mechanisms 
(facilities) are being introduced, the first two for large employers and the last to support businesses and 

households: 

1/Primary Market Corporate Credit (PMCCF) to be used for new loans and bonds issued; 

2/Secondary Market Corporate Credit (SMCCF) to be used to ensure liquidity for corporate bonds, which 
are outstanding; 

3/Term Asset-Backed Securities Loan (TALF), which should be used to make easier the flow of loans to 

reach households and enterprises. The facility also envisages the issuance of ABS (asset-backed securities), 
which to have for a collateral loans for car purchases, student loans, etc.  

In addition to these new facilities, two of the facilities introduced a week earlier, the CPFF and 

MMLF, have been expanded to broaden the types of securities, providing opportunities for municipalities 

to access credit as well.  
All these mechanisms and measures show that the FR is prepared to do everything and implement 

as many tools as possible to prepare the economy for the coming health and subsequent economic crisis.   

The following week, the Federal Reserve continues with the introduction of new measures. A new 
temporary mechanism for foreign monetary authorities is being created to help markets function smoothly, 

including the Treasury markets. This temporary mechanism, the FIMA Repo Facility, is intended to 

provide temporary liquidity of US dollars in international markets so that there is not necessarily a need to 

sell securities on the open market (Federal Reserve, 2020j). 
The Federal Reserve continues with active tools to assists businesses and households on April 9, 

2020. It is taking action to provide an additional USD 2.3 trillion for the economy by reintroducing new 

mechanisms to ensure that it meets its objectives of promoting maximum employment and maintaining 
price stability: 

1/ Paycheck Protection Program Liquidity (PPPLF), aimed at providing liquidity to small enterprises so 

that they can retain their employees even if they are not at work because of social distance measures and 



Finance, Accounting and Business Analysis 3 (1) 2021 

100 

 

containment of the spread of the coronavirus.  
2/Main Street Lending Program (MSLP), aimed at providing USD 600 billion in credits to small and 

medium-sized businesses that had a satisfactory financial situation before the pandemic crisis. These are 

businesses with up to 10 000 employees and annual revenues of no more than USD 2.5 billion. Banks can 

sell up to 95% of loans under the facility, while the remaining 5% should be retained as collateral to 
eliminate risky lending.   

3/ Municipal Liquidity Facility, intended to provide USD 500 billion in loans to states and municipalities. 

The Federal Reserve also provides additional funding by expanding the size and scope of the 
PMCCF), SMCCF and TALF. These facilities are planned to provide up to USD 850 billion in loan funds.   

At end-April, the Federal Reserve issued a decision to keep interest rates unchanged given that the 

health crisis has had a significant negative impact on economic performance, inflation and employment in 

the short run. On June 10, 2020, the central bank continues to hold interest rates at the same levels and 
announces its intention to increase ownings of securities and mortgage-backed securities at least at the 

current pace. 

In the months leading up to the December 16, 2020 meeting, the FR kept interest levels at current 
levels, and at the last meeting of the year decided to increase holdings of securities by USD 80 billion a 

month and mortgage-backed securities by USD 40 billion a month. These monthly rates are planned to be 

maintained at least until the central bank's stated goals of reaching maximum employment as well as price 

stability are more substantially met (Federal Reserve, 2020k).  
This policy is continued at subsequent meetings in January, March, April, June, July, and 

September 2021 by maintaining the specified interest levels and quantity of monthly purchases of securities 

and mortgage-backed securities. 
On September 22, 2021, progress is reported on indicators of economic performance and 

employment, noting the important role of vaccination. It emphasizes that the sectors that were most 

affected by the pandemic crisis have been recovering in the next months (Federal Reserve, 2021). 

In reviewing all the measures undertaken by the FR to deal with the pandemic crisis, one is 
impressed by the swift and timely action taken at the first signs of the crisis. A year on, the Federal Reserve 

is pursuing the same course of monetary policy, holding interest rates steady until some more substantial 

enhancements is reached in meeting the central bank's targets. 
 

Monetary policy of the BoE 

To react against pandemic crisis in 2020 the BoE with its three committees took several decisions 

to strengthen the economy in the United Kingdom. On its special meeting, the central bank disclosed a 

package of pandemic measures on March 11, 2020. The meeting was done before the regular scheduled 
meeting on March 25, 2020, which showed that the BoE was ready to act immediately, but later than the 

Federal Reserve.  

At this special meeting the Monetary Policy Committee decided to reduce the Bank Rate by 0.5 

basis points to the level 0.25%. The Committee also decided to introduce so-called new Term Funding 
Scheme, which was designed to help the small and medium-sized enterprises (Bank of England, 2020a). 

The Term Funding Scheme would be financed by the central bank’s reserves issuance. The banks will be 

able to receive additional funding in case of rising lending to the small and medium-sized enterprises. At 
the same time, the Financial Policy Committee decided to cut the rate of countercyclical capital buffer 

from 1% to 0%. 

On March 17, 2020 the BoE and HM Treasury started a new facility – Covid-19 Corporate 

Financing, aiming to assist liquidity for larger firms. The facility will purchase commercial papers with 
maturity up to one year, providing support to non-financial companies with violation to their cash flows 

and supporting them to pay salaries, suppliers and rents. The Covid-19 Corporate Financing Facility is set 

to terminate for purchases of new commercial paper on March 23, 2021.. 
Two days later (March 19, 2020) the Monetary Policy Committee took decision to increase the 

stock of purchased UK government bonds by GBP 200 billion to GBP 645 billion and to reduce further the 

Bank Rate by 0.15 percentage points to 0.1% (BoE, 2020b). In addition, the borrowing allowance of the 

Term Funding Scheme was increased from 5% to 10% of the stocks of the bank’s lending to the real 
economy.  

On March 24, 2020 the Bank of England activated the Contingent Term Repo Facility, aiming to 

help in case of the sudden demand of liquidity.  
In the following months the Bank of England kept the Bank Rate the same and only increased the 

targeted stock of UK government bonds. On June 18, 2020 the central bank raised by GBP 100 billion the 

UK government bonds’ stock to GBP 745 billion (BoE, 2020c) and stepped up it further on November 5, 

2020 by GBP 150 billion to reach GBP 895 billion (BoE, 2020d). 
In 2021 the Bank of England kept the Bank Rate at the same level of 0.1% and performed the asset 



Finance, Accounting and Business Analysis 3 (1) 2021 

101 

 

purchases up to GBP 895 billion.  
The BoE’s actions showed that the central bank acted in towards policy stimulus, credit policy 

and provision of lending to non-financial businesses, and macro- and micro-prudential policy. 

   

Monetary policy of the ECB 

The ECB’s policy differs from the actions of the other two banks – the FR and BoE. The 
difference is related to the reason that the ECB’s main interest rates are at very low  level i.e. the Bank's 

starting position is less favourable. As of 18 September 2019, the main refinancing operations’ rate is 0% 

and the interest rates on the deposit and credit facilities are -0.5% and 0.25%, respectively (Figure 1). There 
can be no possibilities of a continued reduction in the rate on main refinancing operations, as it is currently 

zero. 

 

 
Source: European central bank 

Figure 1. European Central Bank key interest rates 

 

The other two leading central banks have seen higher interest rates, allowing them to be cut as a 

first response to the pandemic, i.e. the Federal Reserve and the Bank of England initially relying on 
conventional monetary policy tools. Moreover, even the Federal Reserve is also relying on a decrease in 

the minimum reserve ratio to 0%, a change announced on 15 March 2020 and effective from 26 March 

2020 (FR, 2020c). 

Due to the lack of response options for the European Central Bank from the set of conventional 
monetary policy tools, it is turning to the continuation of nonconventional tools. It is noteworthy that the 

European Central Bank reacted almost two weeks later to the coming pandemic crisis than the Federal 

Reserve. Thus, on 12 March 2020, the European Central Bank for the first time introduced a set of 
measures consisting of: 

- Implementing additional refinancing operations with long terms to provide liquidity to the EA’s financial 

system; 

- Introducing better conditions under the long-term refinancing operations, which will take place in the 
next one-year period starting in June 2020 and will apply to small and medium-sized enterprises. These 

better conditions are linked to the setting of an interest rate - 0.25 percentage points under the main 

refinancing operations’ average interest rate (Mihaylova-Borisova, 2020, pp.189) . 
- A decision on additional asset purchases, of which net amount is to be EUR 120 billion by end-December 

2020. These purchases are in addition to an existing asset purchase program existing with a monthly 

volume of EUR 20 billion. 

The following week (18 March 2020), the European Central Bank decides at an extraordinary 
meeting to launch a Pandemic Emergency Purchase Programme (PEPP). By the end-2020, the European 

Central Bank sets the value of this programme at EUR 750 billion. Greek government securities are also 

included in the pandemic asset purchase programme. The European Central Bank is gradually increasing 
the duration and volume of the pandemic programme, initially by a further EUR 600 billion in June 2020. 

At the end of 2020 (on 10 December 2020), the European Central Bank increases the volume of the 

programme by a further EUR 500 billion to EUR 1,850 billion and the end of the programme in March 

-0,5

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

X III

V
II

I I

V
I

X
I

IV IX II

V
II

X
II V X III

V
II

I I

V
I

X
I

IV IX II

V
II

X
II V X III

V
II

I I

V
I

X
I

IV

20082009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Deposit Facility Main Refinancing Operations Marginal Lending Facility



Finance, Accounting and Business Analysis 3 (1) 2021 

102 

 

2022. 
At end-April 2020, the European Central Bank further eases the conditions for long-term 

refinancing operations by setting the interest rate 50 basis points below that for main refinancing 

operations. Non-targeted pandemic longer-term refinancing operations (PELTROs) are also launched.  

Following these measures taken in response to the pandemic crisis, the ECB has not changed its 
policy stance. The unconventional instruments put in place to deal with the pandemic crisis remain in 

place until October 2021. 

 

Effectiveness of the monetary policy of the major central banks 
In order to assess how effective the actions taken by the central banks under consideration have 

been, one should analyse what is happening to the bank’s objectives. The main objective of all three central 

banks is to achieve price stability. The European Central Bank is the furthest away from the pre-pandemic 

understanding of price stability, reporting inflation of around 1% on an annual basis between the third 
quarter of 2019 and the first quarter of 2020 (Figure 2). The BoE and FR achieved about 2% y/y inflation 

before the pandemic crisis. Due to the health crisis, a decline in inflation has been seen  in the UK, EA and 

USA. The deceleration in inflation was prolonged in the Euro area, as most EU countries have seen a 
substantial drop in demand for goods and services and very high infections by end-2020. A gradual 

increase in inflation began after the second wave of the COVID-19. In the period April-June 2021, the UK 

and the EA achieve price stability. However, the United States sees a more substantial rise in inflation. In 

the third quarter of 2021, inflation in the UK and EA is 2.7% and 2.8% respectively, while inflation in the 
United States reaches 5.3%, due to labour shortages and shortages of raw materials for businesses. Labour 

shortages force employers to pay higher wages to retain workers. This, in turn, causes employers to 

increase the prices of final products, which inevitably affects inflation in the country. 
 

 
Source: OECD 

Figure 2. Inflation, annual growth rate, %  
 

The reduction in inflation in the period April-June 2020 in the countries under consideration is 

also in line with the economic downturn, which is most significant in the United Kingdom due to the 

significant number of sick people and the need to close the economy. A gradual recovery of the economies 
follows in the next quarters, with the United Kingdom recording the highest economic growth of 5.5% q/q 

in the period April-June 2021 (Figure 3). The United States of America and Euro area are still reporting a 

moderate pace of recovery. 

 



Finance, Accounting and Business Analysis 3 (1) 2021 

103 

 

 
Source: OECD 

Figure 3. GDP growth rate, percentage change, previous period, % 

  

In respect to the unemployment rate, the strongest shock to the indicator was observed in the USA 

(Figure 4). In the second quarter of 2020, the unemployment rate jumps dramatically to 13.1% compared 

to 3.1% in the previous quarter. The most affected sector because of the pandemic is the leisure and 
hospitality sector, which reports a substantial unemployment rate of over 39%. USA’s unemployment is 

not increasing at this rate and did not reach these levels even in the aftermath of the international crisis, 

when in October 2009 unemployment was reported at 10% according to data published by the 
Congressional Research Center (CRC, 2021). 

Such a significant increase in the unemployment rate is not observed in the United Kingdom and 

the Euro area, which, despite the closure of the economies, managed to maintain the unemployment rate 

at least in the period April-June 2020 and assume a slight increase in the next two quarters of 2020. 
However, in the third quarter of 2021, the highest unemployment rate of 8% of the labour force is seen in 

the Euro area. 

 

 

 

 

 

 

 

 

 

 

 

 

 



Finance, Accounting and Business Analysis 3 (1) 2021 

104 

 

 
Source: OECD 

Figure 4. Unemployment rate, % of labour force 

 

Despite the big shock on unemployment in April-June 2020, the United States of America 

managed to contain its levels in the very next quarter, and a year later unemployment is even below 6%. 
The rapid containment of unemployment shows that the Federal Reserve is responding quickly to the 

looming risks of a pandemic crisis by taking timely conventional and nonconventional monetary policy 

tools. It is also no coincidence that the US central bank has decided to continue to raise its holdings of 
Treasury and agency mortgage-backed securities, at least until the central bank's objectives of maximum 

employment and price stability are more substantially met. 

In respect to employment rate, the United States of America again had the strongest negative 

effect on the indicator in April-June 2020 due to the pandemic crisis (Figure 5). However, due to timely 
measure of the Federal Reserve, the employment rate rose significantly in the quarters after the second 

wave of the coronavirus pandemic. In the second quarter of 2021, the Euro area remained with the lowest 

employment rates. 
 

 
Source: OECD 

Figure 5. Employment rate, % of working age population 

 



Finance, Accounting and Business Analysis 3 (1) 2021 

105 

 

In the current environment of a continuing health crisis and rising inflation globally, central banks 
may need to consider more carefully whether they need to continue some of their non-conventional tools 

or whether they should suspend or limit some of them, such as asset purchases. 

 

CONCLUSIONS 

 

The study presented the unconventional policy tools of the ECB, the Federal Reserve and the 
Bank of England. A comparative analysis of the measures as well as their performance on key 

macroeconomic variables such as economic activity, inflation and unemployment rates was carried out. 

Results showed that the Federal Reserve and the Bank of England were in more privileged conditions and 

terms than the European central bank before the pandemic crisis. Their key interest rates were positive and 
these banks could apply traditional instruments for the monetary policy at the beginning of the crisis before 

conducting the non-conventional policy instruments. The US, the UK and the EA’s GDP growth rates 

were negative in the second quarter of 2020, but gradually the countries covered achieved moderately 
positive growth rates. The United Kingdom recovers fastest, registering economic growth of 5.5% in the 

second quarter of 2021. In terms of price stability, the covered countries and communities managed to 

achieve their price stability target quickly after the first signals of the pandemic crisis, but now central 

banks face a new challenge - rising inflation. This calls into question whether central banks should 
continue on the same course of monetary policy or whether they should abandon and remove some of the 

measures introduced in response to the pandemic crisis, such as the restriction of asset purchases. 

 

ACKNOWLEDGMENT 

 

This work was supported by thе UNWE Research Programme (Research Grant No10/2021 

„Economic Activity And Development Of The Banking Sector In Central And Eastern Europe In The 

Context Of Contemporary Crisis Processes“) 
 

REFERENCES 
 

Mihaylova-Borisova (2014) Money, banking and monetary policy, UNWE Publishing house /In 

Bulgarian language// Михайлова-Борисова, Г. (2014) Пари, банки, парична политика, 

Издателски комплекс – УНСС, София. 

Mihaylova-Borisova, G. (2016) Risks of Falling of the Еurozone and Some EU Countries in a Deflationary 

Spiral, Economic and Social Alternatives Journal, Vol. 3/In Bulgarian language//Михайлова-

Борисова, Г. (2016) Рискове от попадане на eврозоната и някои страни в ЕС в 

дефлационна спирала, Икономически и социални алтернативи, бр.3 

Mihaylova-Borisova, G. (202) Monetary policy of the ECB in response of the pandemic with coronavirus, 
monography “Economy of Bulgaria and the European union: finance, accounting and financial 

control”, Vol. 1, UNWE /In Bulgarian language//Михайлова-Борисова, Г. (2020) Паричната 

политика на ЕЦБ в отговор на пандемията с коронавируса, Колективна монография 

„Икономиката на България и Европейския съюз: финанси, счетоводство и финансов 

контрол“, том 1, УНСС, 183-196. 

Trifonova, S., Trifonova, V. (2016) The ECB’s Contemporary Unconventional Monetary Policy in the 

Context of the Financial Crisis, Economic and Social Alternatives Journal, Vol. 4/In Bulgarian 

language//Трифонова, С., Трифонова, В. (2016) Съвременната неконвенционална парична 

политика на ЕЦБ в контекста на финансовата криза, Икономически и социални 

алтернативи, бр. 4. 
Bank for International Settlements (2019) Unconventional monetary policy tools: a cross-country analysis, 

CGFS Papers, No 63, October. 

Bank of England (2020a) Bank of England measures to respond to the economic shock from Covid-19, 
March 11, https://www.bankofengland.co.uk/news/2020/march/boe-measures-to-respond-to-

the-economic-shock-from-covid-19 

Bank of England (2020b) Monetary Policy Summary for the special Monetary Policy Committee meeting 

on 19 March 2020,  https://www.bankofengland.co.uk/monetary-policy-summary-and-
minutes/2020/monetary-policy-summary-for-the-special-monetary-policy-committee-meeting-on-

19-march-2020 

Bank of England (2020c) Bank Rate maintained at 0.1% - June 2020, 
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/june-2020 

Bank of England (2020d) Bank Rate held at 0.1% and asset purchases increased by £150bn - November 

https://www.bankofengland.co.uk/news/2020/march/boe-measures-to-respond-to-the-economic-shock-from-covid-19
https://www.bankofengland.co.uk/news/2020/march/boe-measures-to-respond-to-the-economic-shock-from-covid-19
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/monetary-policy-summary-for-the-special-monetary-policy-committee-meeting-on-19-march-2020
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/monetary-policy-summary-for-the-special-monetary-policy-committee-meeting-on-19-march-2020
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/monetary-policy-summary-for-the-special-monetary-policy-committee-meeting-on-19-march-2020
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/june-2020


Finance, Accounting and Business Analysis 3 (1) 2021 

106 

 

2020, https://www.bankofengland.co.uk/monetary-policy-summary-and-
minutes/2020/november-2020 

Center for Economic Policy Research (2021) Monetary Policy and Central Banking in the Covid Era, 

London. 

Clarida, R., Duygan-Bump, B., Scotti, Ch. (2021) The COVID-19 Crisis and the Federal Reserve’s Policy 
Response, https://www.federalreserve.gov/econres/feds/files/2021035pap.pdf  

Cour-Thimann, Ph., Winkler, B. (2013) The ECB’s non-standard monetary policy measures, the role of 

institutional factors and financial structure, Working paper series, No 1528, April. 
Giannone, D, Lenza, M, Pill, H, Reichlin, L. (2011) Non-standard monetary policy measures and 

monetary developments, ECB Working Paper, No. 1290,European Central Bank (ECB), 

Frankfurt a. M. 

Federal Reserve (2020a) Federal Reserve Actions to Support the Flow of Credit to Households and 
Businesses, 15 March,  

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm  

Federal Reserve (2020b) Federal Reserve issues FOMC statement, March 3, 
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200303a.htm  

Federal Reserve (2020c) Federal Reserve Actions to Support the Flow of Credit to Households and 

Businesses, 15 March,  

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm 
Federal Reserve (2020d) Federal Reserve Actions to Support the Flow of Credit to Households and 

Businesses, March 15,  

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm 
Federal Reserve (2020e) Federal Reserve Board announces establishment of a Commercial Paper Funding 

Facility (CPFF) to support the flow of credit to households and businesses, March 17, 

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317a.htm 

Federal Reserve (2020f) Federal Reserve Board announces establishment of a Primary Dealer Credit 
Facility (PDCF) to support the credit needs of households and businesses, March 17, 

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317b.htm  

Federal Reserve (2020g) Federal bank regulatory agencies issue interim final rule for Money Market 
Liquidity Facility, March 19, 

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200319a.htm 

Federal Reserve (2020h) Federal Reserve announces the establishment of temporary U.S. dollar liquidity 

arrangements with other central banks, March 19, 
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200319b.htm  

Federal Reserve (2020i) Federal Reserve issues FOMC statements, March 19, 

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323a.htm  
Federal Reserve (2020j), Federal Reserve announces establishment of a temporary FIMA Repo Facility to 

help support the smooth functioning of financial markets 31 March,  

https://www.federalreserve.gov/newsevents/pressreleases/monetary20200331a.htm 

Federal Reserve (2020k), Federal Reserve issues FOMC statement, 16 December,  
https://www.federalreserve.gov/newsevents/pressreleases/monetary20201216a.htm  

Federal Reserve (2021), Federal Reserve issues FOMC statement, 22 September,  

https://www.federalreserve.gov/newsevents/pressreleases/monetary20210922a.htm 
Mihaylova-Borisova, G. (2018) Effects of the negative interest rates on credit activity of banks in 

Eurozone,  Научные вести № 5, 226-233 

Neely, Chr., Karson, Ev. (2021) More Stories of Unconventional Monetary Policy, Federal Reserve Bank 

of St. Louis REVIEW, Second Quarter. 

Rudebusch, Gl. (2018) A Review of the Fed’s Unconventional Monetary Policy, Research from the 
Federal Reserve Bank of San Francisco, December 3. 

Smaghi, L., (2009) Conventional and unconventional monetary policy, Keynote lecture at the 

International Center for Monetary and Banking Studies (ICMB), Geneva, 28 April 2009, ECB 
website 

Szczerbowicz, Ur. (2015) The ECB Unconventional Monetary Policies: Have They Lowered Market 

Borrowing Costs for Banks and Governments?, International Journal of Central Banking, 

December. 
Trichet, Jean-Claude (2013) Unconventional Monetary Policy Measures: Principles—Conditions—Raison 

d’ˆetre, International Journal of Central Banking, January. 

https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/november-2020
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/november-2020
https://www.federalreserve.gov/econres/feds/files/2021035pap.pdf
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200303a.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317a.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200317b.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200319a.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200319b.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323a.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20200331a.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20201216a.htm
https://www.federalreserve.gov/newsevents/pressreleases/monetary20210922a.htm

