Understanding the Global Demand Collapse: Empirical Analysis and Optimal Policy Response

The goal of this project is to deeply investigate on the main causes of the global economic and financial crises and, based on a theoretical framework, to describe a suitable optimal monetary policy. According to our empirical analysis (basically based on US data) we will prove that a mix of extraordinary conditions have been crucial for the origin, develop and growth of the recent crisis. In finding what has been the main cause of such collapse we will prove that the credit crunch has played a crucial role, especially as a sort of contractionary monetary policy. We will also discuss the quantitative easing policies implemented by the Central Banks. Finally, we will seek to establish, by using an existing theoretical model and given extraordinary market conditions, in what central banks were wrong, and if so, where they made mistakes.