July 27, 2021

Currency intervention can help counter Covid crisis

Mervyn King, former governor of the Bank of England, used to say that good monetary policy is boring. In fact, during 16 months of helping in the fight against Covid-19, central banks around the world have had a torrid time.

Central banks of both advanced and emerging market economies have learned some important lessons. Countries like Poland, a relatively small and open economy classified as an emerging market, have resorted to a judicious blend of conventional and unconventional monetary policies to carve out a measure of autonomy in a world dominated by the actions of larger economies.

Emerging market central banks have successfully widened their arsenal of monetary measures to mitigate the gravest economic effects of the crisis. One of these methods is to accrue foreign exchange reserves as a means of lowering the value of domestic currencies. This helps ensure that smaller…

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