Countercyclical monetary policy for overcoming COVID 19 induced recession by introducing incentive based digital currency
Mohammad Abdus Selim · 2020 International Conference on Data Analytics for Business and Industry: Way Towards a Sustainable Economy (ICDABI) · 2020
The objective of this this study is to examine how central bank (CB) can pursue incentive based counter cyclical monetary policy (MP) by introducing CB digital currency (CBDC) and by offering 10% purchase incentives or 10% discounts in each and every sector of the economy and as a result, aggregate expenditures of the economy will increase which will bring full employment in the economy and will eliminate COVID 19 induced recession. The study is based purely on theoretical general macroeconomic equilibrium model. The findings show that the incentive based expansionary MP will increase consumption expenditure, investment spending, government spending and net exports and as a result, aggregate expenditure line will shift up and equilibrium income and employment will increase and unemployment rate will fall and COVID 19 induced recession will disappear. Inflation rate will also fall because all the sellers in the economy will offer 10% purchase discounts and CBDC will be issued with such 10% purchase incentives. Indeed 10% discounts in all the prices of goods and services will automatically suppress inflation rate. Simultaneous decrease in unemployment rate and inflation rate will decrease misery index or discomfort index and economic performance will improve.