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What policy space does a country have for a short-term response to a catastrophic event? To quantify this space, the paper proposes a policy space index. The index combines a quantitative, albeit relatively limited and narrow, fiscal space concept with the indicators of nominal monetary space and reserve space. Each nominal policy space indicator is then adjusted for individual country’s institutional features, such as the status of its currency, income group, access to capital markets, debt distress level, and the exchange rate regime. The final policy space index is derived as a composite of the three nominal policy space indicators, each adjusted for five institutional features. This index is different from the approach to measure fiscal space at the IMF and requires more work before it can be used operationally. The proposed index allows measuring the overall policy space in each country directly in percent of GDP. By way of illustration, the paper applies the index to the Covid-19 crisis.

Macroeconomics --- Economics: General --- Foreign Exchange --- Exports and Imports --- Money and Monetary Policy --- Banks and Banking --- Policy Objectives --- Policy Designs and Consistency --- Policy Coordination --- Global Outlook --- International Policy Coordination and Transmission --- Crisis Management --- Fiscal Policy --- International Lending and Debt Problems --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Interest Rates: Determination, Term Structure, and Effects --- Economic & financial crises & disasters --- Economics of specific sectors --- Currency --- Foreign exchange --- International economics --- Monetary economics --- Banking --- Fiscal space --- Fiscal policy --- Exchange rate arrangements --- Debt sustainability --- External debt --- Reserve currencies --- Money --- Central bank policy rate --- Financial services --- Currency crises --- Informal sector --- Economics --- Debts, External --- Interest rates --- United States