COVID Series - Velocity crowding out money supply
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Oct 06, 2020
COVID Series - Velocity crowding out money supply
Strong countercyclical policy response from monetary and fiscal authorities successfully provided the initial backstop by averting a financial market freeze in the immediate aftermath of COVID led extreme risk aversion in India. Hence, money multiplier for the economy remained broadly stable. However, velocity of money plunged, which explains why real activity contracted sharply despite a supportive money supply.