Escaping from a combination of liquidity trap and credit crunch

This brief exposition suggests that the Federal Reserve System temporarily guarantee a lower bound on stock prices in order to escape the current combination of liquidity trap and credit crunch. It shortly discusses reasons for this measure, consequences, and some alternatives. It is meant as a policy suggestion in case the recapitalization of banks, agreed upon in mid-October 2008, turns out to be insufficient for stabilizing financial markets and the downward spiral in asset prices resumes.

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Year of publication:	2008
Authors:	Heinemann, Frank
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	Liquiditätspräferenz \| Kredit \| Finanzmarktkrise \| Geldpolitik \| Börsenkurs \| Börsenkrise \| USA \| Financial crisis \| monetary policy \| liquidity trap \| credit crunch \| asset markets

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Series:	CESifo Working Paper ; 2450
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	589203320 [GVK] hdl:10419/26495 [Handle]
Classification:	E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies ; E31 - Price Level; Inflation; Deflation ; E44 - Financial Markets and the Macroeconomy ; G21 - Banks; Other Depository Institutions; Mortgages
Source:	EconStor

Persistent link: https://www.econbiz.de/10010264478