Development and Finance from issue 2009/1

Péter Gál - Csaba Moldicz - Tamás Novák

‘Old and New’ Responses to the Global Economic Crisis

- Abstract -

Not since the end of the Second World War has there been such uncertainty surrounding the international economy and its prospects as there was at the end of 2008. To manage the situation and prevent an even more severe economic decline there has been a series of announcements made by the large European countries and the United States in recent months that they were partially nationalising key banks or taking other measures to guarantee the repayment of loans drawn by financial institutions. These direct and indirect measures from the state are intended to stimulate lending so that financial institutions can start lending to each other once again and therefore households and corporate clients can gain access to funding. Stabilising the financial system in this way will enable the money markets suffering from a lack of confidence to breathe once more, interbank lending can start again and both dollar and euro interest rates will fall, making money less expensive. These measures constitute the starting point of the steps to intensify domestic demand, which are designed to put the brakes on the economic decline.

Péter Gál, professor of economics (Corvinus University of Budapest)
Csaba Moldicz, associate professor (Budapest College of Management)
Tamás Novák, associate professor (Budapest Business School)

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