Fact Checking the $700 Billion Bailout

Via Hit & Run, a link to Working Paper 666; isn’t that apropos; written by V.V. Chari, Lawrence Christiano, and Patrick J. Kehoe, three scholars associated with the Federal Reserve, titled Facts and Myths About the Financial Crisis of 2008*. From Working Paper 666.

Here we examine four claims about the way the financial crisis is affecting the economy as a whole and argue that all four claims are myths. Conventional analyses of the financial crisis focus on interest rate spreads. We argue that such analyses may lead to mistaken inferences about the real costs of borrowing and argue that, during financial crises, variations in the levels of nominal interest rates might lead to better inferences about variations in the real costs of borrowing.

Note:  The link to Working Paper 666 leads you to a thrity-three (33) page pdf file.  Eight of the pages are written, and the remainder of the pages are graphs.

Posted by on 10/28 at 07:21 AM

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