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The Federal Reserve as Lender of Last Resort During the Subprime Crisis – Successful Stabilisation Without Structural Changes

Author

Listed:
  • Hansjörg HERR

    () (Berlin School of Economics and Law (HWR), Germany.)

  • Sina RÜDIGER

    () (Berlin School of Economics and Law (HWR), Germany.)

  • Jennifer Pédussel WU

    () (Berlin School of Economics and Law (HWR), Germany.)

Abstract

This paper studies the actions of the U.S. Federal Reserve Bank (FRB) during the financial crisis from 2007-2012 rating the performance of the Federal Reserve during the crisis. The chosen scoring model approach shows that the average performance of five specific measures taken by the FRB only ranks between fair and good. Comparing Stiglitz (2010) viewpoints with those of the FRB, this paper analyses several policies and events and argues that the resulting decisions were well intentioned but that the outcome was different from expectations because of missing regulations and restrictions. Furthermore, the structure of the FRB is examined and criticized.

Suggested Citation

  • Hansjörg HERR & Sina RÜDIGER & Jennifer Pédussel WU, 2016. "The Federal Reserve as Lender of Last Resort During the Subprime Crisis – Successful Stabilisation Without Structural Changes," Journal of Economics and Political Economy, KSP Journals, vol. 3(2), pages 192-210, June.
  • Handle: RePEc:ksp:journ1:v:3:y:2016:i:2:p:192-210
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    References listed on IDEAS

    as
    1. Gadi Barlevy, 2007. "Economic theory and asset bubbles," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 44-59.
    2. Christopher J. Waller, 2011. "Independence + accountability: why the Fed is a well-designed central bank," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 293-302.
    3. Jeremy J. Siegel, 2003. "What Is an Asset Price Bubble? An Operational Definition," European Financial Management, European Financial Management Association, vol. 9(1), pages 11-24.
    4. Milka Kazandziska, 2015. "Macroeconomic policy regime in Poland," Working Papers 59/2015, Institute of Economic Research, revised Apr 2015.
    5. Daniel Detzer & Hansjorg Herr, 2014. "Theories of Financial Crises," Working papers wpaper25, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    6. Paul Milgrom & Nancy L.Stokey, 1979. "Information, Trade, and Common Knowledge," Discussion Papers 377R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Robert Guttmann, 2009. "Asset Bubbles, Debt Deflation, and Global Imbalances," International Journal of Political Economy, Taylor & Francis Journals, pages 46-69.
    8. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
    9. Hondroyiannis, George & Papaoikonomou, Dimitrios, 2015. "When does it pay to tax? Evidence from state-dependent fiscal multipliers in the euro area," Economic Modelling, Elsevier, pages 116-128.
    10. Harris Dellas and George S. Tavlas, 2011. "The Revived Bretton Woods System, Liquidity Creation, and Asset Price Bubbles," Cato Journal, Cato Journal, Cato Institute, pages 485-495.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Asset Bubbles; Federal Reserve Bank; Scoring Model; Financial Crisis; Monetary policy; Regimes of growth.;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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