By: The Quinnipiac University Economics Research Team, Nicholas Ciampanelli
According to the International Monetary Fund (IMF), five CEE countries (Hungary, Poland, Romania, Serbia, & Turkey) are experiencing strong economic recoveries in the waning era of the COVID-19 pandemic due to their implementation of a new monetary policy tool: Asset Purchase Programs (APPs). This program requires national banks to purchase bonds from governments and the private sector, enabling them to stabilize market dysfunctions early in economic crises. As the economies of these nations return to pre-pandemic levels, the IMF now encourages their banks to tighten monetary policies and limit inflation. Despite this recommendation, Hungary and Poland are continuing their APP policies to potentially further bolster their economic recovery.
Alongside these recommendations, the IMF also found APPs to ease the bond market liquidity and aid in overcoming economic shortfalls throughout the pandemic. Furthermore, the IMF cites there were no currency pressures applied to these countries upon acquiring their APPs, providing additional security throughout their economic recovery.
APPs are a relatively new invention by central banks and until now had been used exclusively only by the central banks of large, advanced countries like the United States or the EU via the European Central Bank. The successful application of these programs in smaller countries opens a new policy option for monetary authorities. The limited success in Hungary and Poland is being closely examined as the IMF considers recommending APPs to other nations as a means of alleviating market dysfunctions during economic crises, the organization must also determine when and how to best apply APPs in emerging economies around the globe. These guidelines are currently under consideration.