1. Department of International Trade &2. Commerce, Kyungsung University, Busan, Republic of Koreayeonjoonkim@ks.ac.kr;4. Department of Accounting, Finance, and Economics, University of West Alabama, Livingston, AL, USA
Abstract:
AbstractThe stimulus plans by the US Government after the financial crisis in 2008 may decrease private investment by means of a crowding-out effect. The US Federal Reserve utilized quantitative easing policies to maintain the interest rate as low as possible to minimize crowding-out. The 2008 financial crisis also affects other economies through contagion effects. This paper investigates the existence of the crowding-out effect and contagion effect after the crisis using Temin and Voth's models. The empirical results from vector autoregession show that there is a crowding-out effect in the US economy as well as a contagion effect of the crisis on the Korean and Japanese economies.