James R. Lothian
CenFIS Working Paper 09-01
December 2009

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This paper reviews U.S. Federal Reserve policy prior to and during the course of the recession that began in December 2007. It compares those policies to monetary policy during the Great Depression of the 1930s, with which this recession has been likened. The paper then discusses what policymakers will need to do to in future to avoid a surge in inflation and the difficulties they are apt to face in implementing the necessary shift in policy.

JEL classification: E32, E51, E52, N12

Key words: macroeconomics, money, monetary policy, business cycles, Great Depression

The author thanks John Devereux, Cornelia H. McCarthy, and Gerald P. Dwyer for helpful comments. The views expressed here are the author's and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author's responsibility.

Please address questions regarding content to James R. Lothian, Distinguished Professor of Finance, Fordham University, 113 West 60th Street, New York, NY 10023, 212-636-6147, 212-765-5573 (fax), jrmlothian@aol.com, lothian@fordham.edu.

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