Counter-cyclical Responses: How Development Banks helped the Covid-19 Recovery, and Lessons for the Future

The objective of this paper is to shed light on the crucial and varied counter-cyclical roles played by development banks across the globe during the COVID-19 pandemic, and lessons learned for future shocks. The paper presents new and original information and analysis of how these banks helped countries firms and households cope with the shock of ‘sudden stop’ to the normal functioning of the economy. It identifies key factors determining banks’ different and various responses, including not only acuteness of clients’ need but also the degree and nature of the development bank’s capitalization, links with existing national strategies or plans, its mandate, its ability to innovate, partnerships with other banks, historical experience and degree of political support. Different modalities of responses as well as their degree can be attributed to these factors.