Regarding monetary policy the report shows that countercyclical monetary policy can support shortening of economic recession, The monetary policy by the Fed was strong, immediate, and long lasting. With fiscal policy providing little comfort to the economy, the burden on recovery has fallen on monetary policy and the Bank of England. The government then started the implementation of the devaluation policy by controlling prices in all economic industries. All these changes would result to stabilization of the US economy and strengthened of the dollar. The implementation of the monetary policy was arguably the one which brought to an end the great recession rather than the fiscal policy. We also find that a country’s credit rating is the most important determinant of its fiscal spending during … References There is a general wave of optimum and business activities expand rapidly; as such, more cash is released by banks making additions to consumers’ income and outlay. Contractionary fiscal policy decreases the level of aggregate demand, either through cuts in government spending or increases in taxes. The devaluation of the dollar made it possible for US to start the recovery process especially with the financial instability that Europe was facing, a situation which led to the increased flow of gold in the US. This move would definitely slow down the growth of the economy rather than help in building it. The added stimulus to the economy came mostly from falling taxes and rising transfer payments due to the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009. For example, if the government pursue expansionary fiscal policy, but interest rates rise, and the global economy is in a recession… I think, overall, fiscal and monetary policies are in the right direction. Your privacy is extremely important to us. Conclusions: Discuss the extent to which the use of demand side policies (fiscal policy and monetary policy) during the Great Recession of 2008 has been successful in restoring economic growth and reducing unemployment 4. For instance, some of the fiscal policies by President Roosevelt seemed to hinder all the efforts of ending the recession especially the quest for high wages for all employees. What’s your deadline? Shakka James (author) from Dallas, TX on April 02, 2014: Thank you Schneider for reading my article and post. 26 May. Both fiscal and monetary policy can be either expansionary or contractionary. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. It has … studies ague that fiscal policy is more effective than monetary policy during the financial crisis and therefore fiscal expansion can reduce output loss or output cost (IMF report, 2008a and 2008b). The Former President of Chartered Institute of Bankers of Nigeria (CIBN) and a lecturer of economics at Babcock University Professor Segun Ajibola said this during recent comments on the Nigerian economy. Monetary Policy During Inflation: Inflation is characterized by high marginal efficiency of capital on account of rising prices, incomes, output and employment. This was an important start point in the process of recovering the country from the recession. Web. The database is updated daily, so anyone can easily find a relevant essay example. But any enthusiasm for helicopter money as an independent instrument of the central bank has been dashed by a growing realisation that it can be viewed as a form of fiscal policy, not monetary policy. A brief discussion of monetary policies 3. Monetary Policy During Inflation: Inflation is characterized by high marginal efficiency of capital on account of rising prices, incomes, output and employment. What major fiscal and monetary policy actions were taken during the Great Recession (2007-2009)? I understand how how the recession occurred in … To pursue the Macroeconomic objects of the bank through Monetary Policy There were several cases during the financial crisis that the Federal Bank had to go beyond the standard monetary policies and uti… Corporate revenue as well as profits would increase leading to an increase in the rate of unemployment (Rose, 2010, p. 1). Since the main cause of the recession was high deficits where many Americans live beyond their standards, the US government has lessened the accessibility of credit cards and home equity loans. These nations used different combinations of government spending and tax cuts to boost their sagging economies. In a recession, an expansionary fiscal policy involves lowering taxes and increasing government spending. This can be done through the implementation of expansionary economic policy measures both in fiscal and monetary terms. May 26, 2020. https://ivypanda.com/essays/monetary-and-fiscal-policies-during-the-great-recession/. 2008. As more money is released into the economy, consumer spending increases. In response to the pandemic, government has scaled up the social investment programmes. 2020. Monetary policy increased the amount of money in the economy and reduced the interest rates, which in turn released money into the economy and reduced government reserves. devesh prajapati from New Delhi on April 07, 2014: Great work shakka James on monetary and fiscal policies. The current fiscal response shares key similarities to the fiscal stimulus enacted during the Great Recession. The expectations of the people during this time worked as macroeconomic policies changed as well which produced drastic changes in prices of commodities and other variables. Fiscally, the policy model should take a modified stance where there would be ‘targeted tax relief’, decreased discretionary and unwarranted government expenditure and targeted increased investments. A high inflation rates slows down the growth of the economy. This policy would have resulted to promotion of the country’s economy at the expense of their neighboring countries. Expansionary policies help in reviving an economy after a recession. These inflationary dangers have now diminished, and would decline further in a recession. However, other European nations recovered from the recession earlier than the US did. The Great Recession: US dynamics and spillovers to the world economy. Increasing and decreasing the rate of taxes aided the United Stated, during the Great Recession, in price stability and influenced the aggregate levels of the economy. Expansionary monetary policy is when a nation's central bank increases the money supply, and this method works faster than fiscal policy. We did get a fiscal stimulus package shortly after Obama took office, and it helped. The discussion of the causal impacts of monetary policy focuses on papers written in the last decade and the findings of scholars using dynamic structural general equilibrium modeling. As a result, savings by the Americans are already increasing as credit levels decrease. While fiscal policy has been used successfully during and after the Great Depression, the Keynesian theories were called into question in the 1970s after a long run of popularity. 2010. Monetary and fiscal policies during the great recession. The second world war however, boosted the government’s expenditure and consequently, led to higher growth rates compared to those during the fiscal policy implementation (Blinder And Zandi, 2010, p. 1). Ben S. Bernanke: Chairman Federal Reserve. 2010. 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