Despite assertions to the contrary, the New Deal’s fiscal policies were key to ending the Great Depression

In the years following the financial crisis of 2008, many policymakers have turned to the recovery that led the West out of the Great Depression in the 1930s for inspiration of how to address current problems. While many have re-interpreted the policy actions of that period to emphasize the role of monetary over fiscal policy in the recovery, Matías Vernengo urges caution. He argues that while much analysis asserts that expansionary monetary policy led to increased private consumption and investment, low rates from the Fed also made increased public spending more sustainable, thus leading to positive effects on GDP and employment.