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Ending the Great Recession: Analyzing the US Government’s Response

This paper by Alan S. Blinder and Mark Zandi examines the US government's aggressive monetary and fiscal policies that effectively ended the Great Recession. Using Moody’s Analytics Model, the authors analyze the significant macroeconomic impacts of these policies on real GDP and inflation, highlighting two main components: fiscal stimulus and financial market interventions like TARP. The study concludes that these actions were crucial in stabilizing the financial system and sparking economic growth, thereby preventing a second Great Depression.

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Ending the Great Recession: Analyzing the US Government’s Response

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  1. How the Great Recession Was Brought to an End Alan S. Blinder Professor of Economics, Princeton University Mark Zandi Chief Economist, Moody’s Analytics

  2. The US Government’s response to the financial crisis and ensuing Great Recession included some of the most aggressive monetary and fiscal policies in History. • In this paper, B and Z use Moody’s Analytics Model to simulate the macroeconomic effects of the governments total policy response.

  3. They found that the effects on real GDP, and inflation are huge and averted a second great depression. • B and Z divide the effects in to two components • Fiscal Stimulus • Financial Market policies such as TARP and bank stress test • The government set out to accomplish two goals: to stabilize the sickly financial system and to mitigate the burgeoning recession, ultimately re- starting economic growth.

  4. Conclusion • The financial panic and Great Recession were huge blows to the US economy. • No one can know for sure what the world would look like today, but it was clear that policy makers had to act. • Ben Bernanke was probably right when he said that “We came very close in October [2008] to Depression 2.0.”

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