The Impact Of Expansionary Monetary Policy During The...

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 robust 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, aim to draw on the 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 in financial supervision and to make inferences about whether monetary policy is the right (best) framework going forward. While the main focus will be on the economy of the United States, simple flow diagrams andShow MoreRelatedThe Federal Reserve And Expansionary Monetary Policy1657 Words   |  7 Pagesstable, like during a recession, the American people turn the government and demand that they fix whatever problem is occurring. 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