A Tale of Two Bernankes

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A Tale of Two Bernankes A Tale of Two Bernankes Contents 1. Introduction 2 2. Bernanke on Japan 2 2.1 How Japanese faced the financial crisis 2 2.2 Bernanke’s Suggestions for Japan 4 3. Bernanke’s Monetary Policy in The Fed 8 3.1 Late 2000s Financial Crisis 8 3.2 The responses and policies adopted by US 9 3.3 Krugman’s Criticism on Bernanke 12 3.4 Lessons to be learned from the Previous Recessions in the United States 13 4. Final Thoughts 16 5. Bibliography 18 6. Appendix: 20 1. Introduction Did Bernanke change his views as suggested by Krugman? That will be the question to be addressed throughout this paper. We will first look into the causes and effects of Japan’s economy downturn and the policies that have been adopted by the Bank of Japan to stabilize the economy. By doing so, we will then try to understand why did Ben Bernanke strongly condemned the policies set by Bank of Japan in his writing called “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” To answer the question further, we will also need to look into the time that when Ben Bernanke is being put to the test during the financial tsunami which broke out on September 2008. Here, we will study the causes and effects of the financial tsunami towards the United States economy and also the policies adopted by Bernanke to stabilize the economy. Thus, looking into the financial tsunami in the United States and Japan’s economy downturn through Bernanke’s policies and suggestions, we will then be able to determine was there really any inconsistency as Paul Krugman has suggested and whether Bernanke should keep doing what he is doing or follow Krugman’s advice. 2. Bernanke on Japan 3.1 How Japanese faced the financial crisis Asset booms and busts can be very destabilizing, but the public and even the government

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