Comparison of FEDs monetary policy in times of Great Depression and financial crisis 2007 – 2009

The main goal of this thesis is comparison of FEDs monetary policy in times of Great Depression and financial crisis 2007 -- 2009. Both of them began when the speculative bubble burst (in the first case it was in stock market, in the second one it occurred in real estate market). The effect of speculative bubbles bursting had very negative impact on global economic system. The FEDs monetary reaction to the both crises was very different. It differentiates in many aspects -- in times of Great Depression FED acted passive -- did not provide large open market purchases, did not lowered the interest rate quick enough to avoid the money stock fall-down. In current crisis, FED did not repeat mistakes made during Great Depression. In response to the market pressure, FED created several unconventional tools to support liquidity of depository institutions, primary dealers and commercial paper market. Via these new-invented programs, FED did not allow the money stock to fall and as the financial strains eased, they slowly disappeared. Besides these liquidity programs, FED supported economy with fast interest rate lowering and providing quantitative easing. Steps taken by FED helped to stabilize financial markets