Question

Please provide a thorough explanation/answer:

Did monetary and/or fiscal policies improve economic conditions after the 2008 financial crisis? With the benefit of hindsight, did these policies have unintended consequences?

Answer 1

FED responded aggressively to the crisis and implemented a lot of programs to support financial liquidity, maximum employment and price stability. Fed adopted the expansionary monetary policy.

Fed approved currency swap agreements to provide dollar liquidity to banks.

FED provided short term lending through discount window.

Fed provided direct liquidity to borrowers and investors through key credit markets and instruments like commercial paper and mutual fund.

Fed expanded open market operations and put downward pressure on long term interest rates.

Yes, these were effective and eased overall financial conditions.

But it took a very long time and people suffered a lot.