The role of monetary and fiscal policies in handling the global financial crisis : effects and defects.

• Main Authors: Lum, Wan Teng., Turakhia Aditya.
• Other Authors: Sng Hui Ying
• Format: Final Year Project
• Language: English
• Published: 2010
• Subjects: DRNTU::Social sciences::Economic theory::Macroeconomics
• Online Access: http://hdl.handle.net/10356/42383
• Institution: Nanyang Technological University

The boom of the world economy during 1990-2007 made economists envisage that recessions are a phenomenon of the past, and through careful study and understanding of world economies, setbacks in the business cycle can be combated (Krugman, P., 2009). However the Global Financial Crisis (GFC) showed that a capitalist economy cannot survive if it oscillates between the threats of an imminent collapse of asset values and employment, and threats of inflation and rampant speculation, especially if these threats become realized (Minsky, 1989). This paper dwells on the potential problems in the economic policies routinely used in macroeconomic management. Often these policies lead to conflicting outcomes, and governments are forced to make critical decisions. The aim of this paper is to highlight how these fiscal and monetary policies work, what are its drawbacks, and how governments use these policies, by making specific references to the Global Financial Crisis, the Great Depression and the European Fiscal Crisis.