U.s. Fiscal And Monetary Policy And Financial Markets Research. "new Economy"

The "New Economy" of the U.S. in the 1990's ended up with an economic recession in the early 21st century, and meanwhile some accidental events happened to the U.S. This situation appeared to be a great challenge to Bush Junior administration and Federal Reserve Board. In the U.S. microeconomic management, fiscal policies are conducted as long-term adjustment methods while monetary policies as short-term methods, and flexibility and coordination is focused in using fiscal and monetary policies. This paper makes a comprehensive analysis on the fiscal policies of tax deduction and expenditure expansion and the monetary polices of flexible and measured adjustment of federal fund rate in the phases of recession, slow recovery and growing with hidden problems. This paper also studies on the effects on financial markets by fiscal and monetary policies. Facing the difficulties of real estate bubble, "Twin Deficits" and high oil price, the U.S. fiscal and monetary policies, being encircled by the problems like fiscal deficit deduction and the time to stop elevating interest rate, still don't have a clear prospect in the near future. As for the financial markets, dollar will be in depreciation in long-term; stock market will be dragged down by incompetent enterprises and worsened business environment; and the threat of inflation and the lagged effect on interest construction by interest raising imposes pressure on the U.S. bond market.