The Federal Reserve's Response to the 1987 Market Crash (U.S. Historical)

Kaleb Nygaard ()
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Kaleb Nygaard: YPFS, Yale School of Management, https://elischolar.library.yale.edu/journal-of-financial-crises/

Journal of Financial Crises, 2020, vol. 2, issue 3, 116-130

Abstract: The S&P 500 lost 10% the week ending Friday, October 16, 1987, and lost an additional 20% the following Monday, October 19, 1987. The date would be remembered as Black Monday. The Federal Reserve (the Fed) responded to the crash in four distinct ways: (1) issuing a public statement promising to provide liquidity, as needed, "to support the economic and financial system"; (2) providing support to the Treasury securities market by injecting in-high-demand maturities into the market via reverse repurchase agreements; (3) allowing the federal funds rate to fall from 7.5% to 7.0% and below; and (4) intervening directly to allow the rescue of the largest options clearing firm in Chicago.

Keywords: Federal Reserve; stock market crash; 1987; Black Monday; market liquidity (search for similar items in EconPapers)
JEL-codes: G01 G28 (search for similar items in EconPapers)
Date: 2020
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