U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy

55 Pages Posted: 13 Jun 2002 Last revised: 27 Oct 2010

See all articles by Frederic S. Mishkin

Frederic S. Mishkin

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Eugene N. White

Rutgers University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 2002

Abstract

This paper examines fifteen historical episodes of stock market crashes and their aftermath in the United States over the last one hundred years. Our basic conclusion from studying these episodes is that financial instability is the key problem facing monetary policy makers and not stock market crashes, even if they reflect the possible bursting of a bubble. With a focus on financial stability rather than the stock market, the response of central banks to stock market fluctuations is more likely to be optimal and maintain support for the independence of the central bank.

Suggested Citation

Mishkin, Frederic S. and White, Eugene Nelson, U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy (June 2002). NBER Working Paper No. w8992. Available at SSRN: https://ssrn.com/abstract=315989

Frederic S. Mishkin (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Eugene Nelson White

Rutgers University - Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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