NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Crisis and Responses: the Federal Reserve and the Financial Crisis of 2007-2008

Stephen G. Cecchetti

NBER Working Paper No. 14134
Issued in June 2008
NBER Program(s):   ME

Realizing that their traditional instruments were inadequate for responding to the crisis that began on 9 August 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.

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Document Object Identifier (DOI): 10.3386/w14134

Published: Stephen G. Cecchetti, 2009. "Crisis and Responses: The Federal Reserve in the Early Stages of the Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 51-75, Winter.

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