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The US monetary performance prior to the 2008 crisis

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  • Li, Kui-Wai

Abstract

This article uses a Structural Vector Autoregressive (SVAR) approach to study the different shocks to the monetary performance in the two decades of the US economy prior to the 2008 financial crisis. By using the Federal Fund Rate as a measure of change in the monetary policy, this study shows that interest rate expectation is informative about the future movement of Federal Fund Rate and the anticipated monetary policy should be one of the crucial reasons in causing monetary and financial deterioration in the US economy. This article discusses a possible conjecture of a low interest rate trap when a persistent and prolonged low interest rate regime led to financial instability.

Suggested Citation

  • Li, Kui-Wai, 2012. "The US monetary performance prior to the 2008 crisis," MPRA Paper 41036, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:41036
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    References listed on IDEAS

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    Cited by:

    1. Kui-Wai Li, 2017. "Is there an ‘interest rate – speculation’ relationship? Evidence from G7 in the pre- and post-2008 crisis," Applied Economics, Taylor & Francis Journals, vol. 49(21), pages 2041-2059, May.
    2. Wang, Tianyu & Li, Kui-Wai, 2018. "Examining the liquidity and productivity relationship: Evidence from post-reform China," MPRA Paper 100837, University Library of Munich, Germany, revised 31 May 2020.

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    More about this item

    Keywords

    monetary shocks; interest rate; financial crisis;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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