The Impact Of Expansionary Monetary Policy During The Great Recession

800 Words Mar 23rd, 2016 4 Pages
The 2008 Great Recession has been declared by the International Monetary Fund (IMF) as the worst global recession of the 20th century since the Great Depression [1]. After eight years, global economies today continue to struggle to find sustainable recovery and growth. The crisis was a massive institutional failure that involved the bursting of the asset bubble, the collapse of the stock market, and the moribund employment rate among others. The crisis has since triggered economists, governments, and financial institutions to critically revisit their standard models and to question whether the understanding of the inflation-targeting framework (i.e. the Monetary Policy) may be fundamentally flawed (inflation is the percentage rate of change in the general price level). This paper will explore and critically evaluate the effectiveness of expansionary monetary policy during the Great Recession by taking a closer look at the pre-crisis view of monetary policy (prior to 2007), its role during the 2008 crisis, and ultimately, this paper aims to draw on lessons learnt to formulate conclusions (as well as identify areas of limitations) and shed insight on potential next steps. More specifically, the paper will probe further to ask how central banks can improve their role While the main focus will be on the United States economy, simple flow diagrams and comparison charts to other countries will be used to elaborate on the rationale and conventional wisdom of monetary policy since…

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