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On Monday, March 16, the Mercatus Center at George Mason University announced a call for papers on the response to and recovery from the COVID-19 pandemic. The following paper is the first of our special COVID-19 Policy Brief Series, which will feature all accepted proposals. As part of this special policy brief series, the Mercatus Center will send a weekly digest email containing recently published COVID-19 policy briefs.
David Beckworth explains how to ensure that the overhaul of the Fed’s operating framework can provide powerful countercyclical policy in a manner that is both systematic and based on rules. The overhaul consists of three main steps: a two-rule approach to monetary policy to handle both positive and negative interest rate environments, a nominal GDP level target, and a fiscal facility to do direct money transfers, or “helicopter drops,” to households once interest rates hit 0 percent.
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