FISCAL STIMULUS AND COUNTERCYCLICAL MONETARY POLICIES: COMMENTARIES ON CURRENT WORLDWIDE DEPRESSION

Abstract

The US and the world in general are inside the worst financial crisis since the Great Depression of the 1930s. Signs of significant problems in the US economy first occurred in late 2006 and the second quarter of 2007 when home prices plummeted and defaults by subprime mortgage borrowers began to affect the mortgage-lending sector entirely as well as other parts of the economy noticeably. These events sent equity markets consumer confidence and overall economic health lower. As. the US government debated over the rescue plan the crisis spread worldwide. As we approached the end of 2009 the world financial system and the economies were still in crisis. firms paper examines the fiscal stimulus and countercyclical monetary policies in the US during the current financial tsunami and the economic downturn. It is fair to say that current recession is a combination of financial crisis in the banking system?: and economic downturn. Hence there is a requirement for implementation of both fiscal stimulus and countercyclical monetary policy to stimulate the economy.