The international financial system after Covid-19

Abstract

In March of 2020, international markets seized up with a violence unequaled since the Global Financial Crisis (GFC) nearly a dozen years before. As economies around the world locked down in the face of the potentially deadly but completely novel SARS-CoV-2 virus, stock markets fell, firms and governments scrambled for cash, liquidity strains emerged even in the market for U.S. Treasurys, and capital flows to emerging and developing economies (EMDEs) reversed violently. Once again, the world economy appeared on the brink of collapse—until it was pulled back by monetary and fiscal interventions that outstripped even those of the 2008–2009 Global Financial Crisis.