Finance Implications of the Great Recession

Abstract

Macroeconomic events in the United States during the last ten years—the housing bubble, the financial crisis and the subsequent, deep recession—brought several puzzles to the attention of economists and policymakers. Why were there such large price booms and busts in places like Las Vegas and Phoenix, where land was readily available and construction markets were very active? Why are economies so slow to recover from recessions that coincide with financial crises? Can policymakers use fiscal stimulus to increase output and accelerate economic recovery after a recession?