Federal Reserve Policies 2000-
The first decade of the 21st century saw the U.S. economy on a peripatetic through tumultuous events, euphoric highs, and abysmal lows. The ten-year window highlighted three periods: 2000-2004, 2004-2007, and 2007-2010 in which the Federal Reserve actively utilized their policy levers to achieve their dual policy mandate of full employment and low inflation. The Fed's policy bag includes: the Fed funds rate, open market operations, discount rate, reserve requirements, and margin rates all of which were utilized during these three periods to achieve the ostensible goals of Fed policy. It is worth noting that in each of the three periods the Fed responded to economic conditions which they perceived to be harbingers of either inflationary pressures or anemic GDP and employment growth.
2000-2004
On March 10, 2000 the NASDAQ composite, a stock index representative of high flying dot-com companies, peaked at 5048 (Zarroli, J. March 10, 2010). From that point the technology laden index collapsed and along with it the bubble of inflated valuations. The economy overall began to slow with GDP growth falling and eventually leading to an eight-month recession beginning in March of 2001 and ending in November of 2001 (USA Today.com. July 17, 2003). Amidst this backdrop the nation and the economy also suffered a devastating blow on September 11, 2001 with the terrorist attacks on New York and D.C. The Federal Reserve which had targeted its Fed funds rate at 6.50% in May of 2000 began a loosening of monetary policy in early 2001 with a series of 50 and 25 basis point reductions in the target rate (Federal Reserve.gov. N.D.). The Fed funds rate is the rate at which banks lend overnight deposits to other financial institutions. The...
Alan Greenspan's testimony starts with a comparison between the state of the U.S. economy in July 2004, time of his present testimony, and the state of the economy in February 2004, the time of his previous testimony in front of the U.S. Congress. In February 2004, the main problem of the U.S. economy, as identified by Greenspan, was the fact that the company's increase in income and net profits were related
Monetary Policy Any change in the central back policy or the bank reserves, which is made to influence the interest rates and thus the investment, employment or production, is called the monetary policy. If the monetary authority wants to increase production, they need to increase the bank reserves. The bank then expands the money supply, which in turn reduces the interest rates. Monetary policy is one of the tools that a
Since 1970, the economic growth in U.S. had increased in real terms at a rate of 3.16% per annum, up to 2001, when the American economy registered a slow down period and the economic growth amounted 1.7%. Since 2003, the growth rate averaged 4.62% per annum. Currently, the economic growth is heavily influenced by fiscal relaxation policy that led to increased investments and economic growth level. The average return
57 Spillover Effect on the Stock Market and Bond Prices in Relation with GARCH Abstract This study examines the spillover effect between bond and stock markets in the U.S. using GARCH. The finding of a unidirectional spillover flow from bonds to stocks in the U.S. is discussed in the light of new marketplace variables that have been introduced into the markets in the previous decade. These variables include the rise of HFT, algorithm-driven
remedy for the U.S. economy as the country has started to recover from the shock of September 11. Though the tragedy of September has drastically effected the economic growth of the country but the forces of recovery will soon lift the economy out of the recession. However, this turnaround is going to go a long way. The general opinion about the economy of the United States is that the
The excessive use of margin had encouraged speculation. Poor governance on the part of banks and brokerages allowed for a market failure where investors were not making rational decisions, resulting in a bubble. A variety of new taxes were created to offset Roosevelt's social programs. The American psyche had been scarred by the abject poverty of such a wide proportion of the population. There was palpable fear and desperation. This
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now