||Central Bank Of Barbados
The COVID-19 pandemic was a negative shock to the real economy which induced both liquidity pressures and operating losses for firms across the world as well as weakened their insolvency. Monetary authorities were left to contend with harmonising the accuracy of their policy measures with the speed of reaching those most affected. Utilising a combined empirical approach of Propensity Score Matching (PSM) and scenario analysis, this study evaluates the impact of credit guarantee schemes as a counter-cyclical tool during a crisis in the small open economy of Barbados. The results suggest that credit guarantee schemes represent a viable monetary policy tool during a crisis to shift persistent liquidity from the banking sectors to the illiquid corporate sector.
Expanding the Central Bank's Tool Kit_WP3v1.pdf