Economic Matters and the Mathematics of Finance

Economic Matters
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The Covid-19 pandemic has posed significant challenges to many industries, especially in the economic sector. Most countries designed strategies to stabilize the disrupted economic activities as a response to the worsening situation (Obstfeld, 2022). Numerous dislocations emerging from the pandemic extended to every part of the economy across nations. The affected sectors comprised corporate, public, consumer, and capital markets. Countries like the U.S. reacted to the strain by implementing aggressive fiscal interventions, such as the $1.9 trillion American Rescue Plan Act, signed by the nation's president, Biden. Actions taken regarding the monetary front entailed multi-faceted bond purchasing and liquidity programs. This paper analyzes the above factors to establish how the U.S. government effectively reacted to the pandemic's impacts on the economy. The discussion utilizes numerous events like U.S.'s presidential elections and fiscal stimulus packages by FED and other central banks to respond to Covid-19. Besides, the analysis focuses on the military action in Ukraine and various sanctions against Russia.
The monetary policies designed by "the U.S. Federal Reserve System" play an essential role in macroeconomic boosting based on the fiscal stimulus packages. The agency's efforts to reverse and halt the economic challenge triggered by the pandemic involved multiple forms. First, FED implemented the conventional regulation toolkit incorporating unprecedented speed. It cut its nominal interest rate to 0% and offered forward guidance that the zero-rate policy would be operational until the economy stabilized. Later, FED announced $700 billion in asset purchases of U.S. mortgage-backed securities and treasuries. This action meant a significant relief to the economy through improved transactions free from taxation. In March 2021, FED indicated it would allow its policy of bank reserve needs to expire on 31st March 2021.
Initially announced in 2020, the regulation temporarily offered banks the allowance to exclude deposits and treasuries with Fed banks based on their balance sheets to calculate reserve requirements. This would allow them to lend more. Besides, during the same year, Fed indicated that the temporary limitations on buybacks and dividends placed on banks in 2020 would be terminated after June 2021. The offer would allow banks to accumulate more money without charges to boost their recovery from the pandemic. The allowance was to be offered to banks to meet capital needs during stress tests in 2021. Restrictions were moved forward for banking entities that failed to attain capital requirements. Although the pandemic was still a significant problem, the above strategies greatly empowered America's economy between 2021 and 2022.
The U.S. presidential elections held in 2020 greatly impacted the country's financial markets. Apart from the internal market, the event also affected global financial aspects since it was a major global business actor. The nation's presidential elections are strategic because they affect future and current economic trends. The 2020 election came when the U.S. was facing numerous challenges. An example was th...