ABSTRACT
The current economic and financial crisis has provided us with an ample opportunity to reconsider our way of thinking about the economy and economics. One prominent feature of the current crisis was more or less the same set of policy responses: governments and central banks engaged in an expansionary fiscal and monetary policy mix. However, there was also a certain variation in policy responses: the US and the UK were more aggressive in their response, while the Euro-area and Japan were less so. The Bank of Japan (BOJ) did not increase its balance sheet as much as the Federal Reserve Board (FRB), Bank of England (BOE), or European Central Bank (ECB) (Figure 5.1), so that the yen appreciated against the US dollar and the euro (Figure 5.2), which led to the severe plunge in industrial production (Figure 5.3).2
