Český finanční a účetní časopis 2014(1):34-49 | DOI: 10.18267/j.cfuc.379

FED and the US Government Cooperation Effort to Absorb the Financial Crises Impacts

Vojtech Dohányos
Ing. Vojtech Dohányos - študent doktorského štúdia; Katedra měnové teorie a politiky, Fakulta financí a účetnictví, Vysoká škola ekonomická v Praze, Nám. W. Churchilla 4, 130 67, Praha 3; <xdohv03@vse.cz>.

The financial crises in 2007 and 2008 showed that pure FFR corrections are insufficient and are not providing the desired goals in the GDP evolution and the other macroeconomic indicators. FED had to buy out some financial institutions, because the financial sector was one of the most impacted sectors during the financial crises and this sector of the economy infected the real economy. Toxic asset buy outs and direct lending by FED were the best steps taken and even statistics is confirming it. Direct monetary base increase had the biggest impact on the GDP evolution. Bank liquidity replenishment allowed financing the investment projects and also consumption which is the biggest proportion of the US GDP. The US government effort to boost the economy by increasing government spending showed that this way of helping the economy was contra productive and with high risk impact into the budget deficit evolution. The government should aim its focus on investing or at least to support investment as much as possible; because investments are the only guarantee long-term positive GDP impact and employment growth.

Keywords: FED; GDP; Financial crises.
JEL classification: E32

Published: March 1, 2014  Show citation

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Dohányos, V. (2014). FED and the US Government Cooperation Effort to Absorb the Financial Crises Impacts. Czech Financial and Accounting Journal, 2014(1), 34-49. doi: 10.18267/j.cfuc.379
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