Crisis and Responses: The Federal Reserve in the Early Stages of the Financial Crisis
AbstractRealizing that their traditional instruments were inadequate for responding to the crisis that began on August 9, 2007, Federal Reserve officials improvised. Beginning in mid-December 2007, they implemented a series of changes directed at ensuring that liquidity would be distributed to those institutions that needed it most. Conceptually, this meant America's central bankers shifted from focusing solely on the size of their balance sheet, which they use to keep the overnight interbank lending rate close to their chosen target, to manipulating the composition of their assets as well. In this paper, I examine the Federal Reserve's conventional and unconventional responses to the financial crisis of 2007-2008.
CitationCecchetti, Stephen G. 2009. "Crisis and Responses: The Federal Reserve in the Early Stages of the Financial Crisis." Journal of Economic Perspectives, 23 (1): 51-75. DOI: 10.1257/jep.23.1.51
- E32 Business Fluctuations; Cycles
- E52 Monetary Policy
- E58 Central Banks and Their Policies
- G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation