2.2. Policy Responses to Recession some success in normalizing conditions in money markets, but has had less infl uence over longer term interest rates.14 Interest rates have been cut to historically low levels in many countries,15 but there is still a lack of readily available credit, as banks impose more stringent requirements on individual and business borrowers. Funding issues are likely to persist until the banking sector is recapitalized and losses on impaired assets are recognized fully. If there is little precedence for the scale and speed of the economic slowdown, the policy response is clearly unprecedented. The IMF notes that policy-makers around the world have responded using a range of measures, including large-scale fi scal stimulus, accommodative monetary policy and support for the fi nancial sector. The IMF concludes that “the speed and magnitude of the policy response [has] played a key role in beginning to turn around market sentiment, in slowing the decline in economic activity, and in truncating downside risks”12 and observes signs of recovery visible in some emerging markets (particularly Asia), although the nascent recovery is still struggling to become established in most advanced economies. In direct response to the crisis, more than fi fty countries have launched economic stimulus plans (Insight 4) to boost aggregate demand (Insight 2). 16 The OECD records as many as 25 out of 30 OECD countries as having launched stimulus plans (Figure 2). Stimulus plans represent a trade-off or compromise between immediate measures that can be implemented quickly to fuel economic recovery and creating the long-term conditions favorable for promoting economic growth. The US Congressional Budget Offi ce (CBO) study, “Options for Responding to Short-Term Economic Weakness”,17 published in January 2008 laid out three principles for effective stimulus, economist Menzie Chinn characterized as timely, targeted and temporary”.18 Budgetary support, low policy interest rates and steeper yield curves have helped strengthen fi nancial institutions’ earnings and balance sheets, but in some economies, there is little evidence that such stimulus measures have succeeded in restoring lending to the private sector or even boosting the money supply.13 Monetary policy has had Econom 8 which the “ i 18 Confronting the Crisis: ICT Stimulus Plans for Economic Growth