Policy Responses to Modern Economic Crises

Policy Responses to Modern Economic Crises

UNIVERSITY VIRGINIA

Policy Responses to Modern Economic Crises

In March twenty twenty, Jay Powell, Federal Reserve chair, faced a daunting prospect that only a few months prior seemed like a remote possibility: massive expansion of the Fed's balance sheet. Over the past five years, the economy had experienced steady economic growth, permitting the Fed to reduce its balance sheet. The Fed's economists expected the trend to continue. But the rapidly spreading global coronavirus pandemic had rendered moot all prior forecasts. In addition to the health crisis, the United States-and the world-faced the prospect of another economic crisis-just over ten years after emerging from the largest recession since the Great Depression. How should Powell and his counterparts who ran fiscal policy respond to the crisis? And to what extent could the policy experiments implemented in response to the Great Recession of two thousand eight guide the monetary and fiscal policy interventions in response to the pandemic crisis?