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Federal policy responses to the 2007-2009 credit crunch in the US

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  • £ukasz Goczek

    (University of Warsaw, Poland)

Abstract

This paper discusses the key characteristics of the U.S. financial crisis 2007-2009 and focuses on the Federal Policy Response to the lack of liquidity in the financial sector known as the “Credit Crunch”. The surprising depth of the crisis required unprecedented policy measures to be used in order to tackle the mounting liquidity problems in banks and prevent the subsequent credit crunch from taking its toll in the real economy. This required extension of monetary powers of the Federal Reserve and Treasury, which was unmatched in history. The policy response to credit crunch and house price bust was especially important given the fact that recessions following such events tend to be much deeper and longer than any other types of recessions. More importantly, however, the analyses of the current policy responses will determine which form financial markets will take in the next few decades, thus how vulnerable the world economy will be to next disruptions and liquidity problems.

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Bibliographic Info

Article provided by Uniwersytet Mikolaja Kopernika in its journal Equilibrium. Quarterly Journal of Economics and Economic Policy.

Volume (Year): 6, Issue 3 (2011)
Issue (Month): ()
Pages: 27-42

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Handle: RePEc:cpn:umkequ:2011:v3:2

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Related research

Keywords: credit crunch; liquidity; finance; United States; monetary Policy;

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  1. Willem Buiter, 2009. "Negative Nominal Interest Rates: Three ways to overcome the zero lower bound," FMG Discussion Papers, Financial Markets Group dp636, Financial Markets Group.
  2. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "A Decade of Debt," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 6222, July.
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  12. Frederic S. Mishkin, 2011. "Monetary Policy Strategy: Lessons from the Crisis," NBER Working Papers 16755, National Bureau of Economic Research, Inc.
  13. Josh Lerner & Peter Tufano, 2011. "The Consequences of Financial Innovation: A Counterfactual Research Agenda," Annual Review of Financial Economics, Annual Reviews, Annual Reviews, vol. 3(1), pages 41-85, December.
  14. Yacine Aït-Sahalia & Jochen Andritzky & Andreas Jobst & Sylwia Nowak & Natalia Tamirisa, 2010. "Market Response to Policy Initiatives during the Global Financial Crisis," NBER Working Papers 15809, National Bureau of Economic Research, Inc.
  15. Baba, Naohiko & Packer, Frank, 2009. "From turmoil to crisis: Dislocations in the FX swap market before and after the failure of Lehman Brothers," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(8), pages 1350-1374, December.
  16. Naohiko Baba & Frank Packer, 2009. "From turmoil to crisis: dislocations in the FX swap market before and after the failure of Lehman Brothers," BIS Working Papers, Bank for International Settlements 285, Bank for International Settlements.
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