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Southern African Business Review

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The economic impact of the Troubled Assets Relief Programme (TARP) in the USA: an assessment of the level to which an optimal allocation of funds occurred

CJ van Aardt, GP Naidoo

Abstract


The 2009 international fi nancial crisis has led to many countries,
including the USA, bailing out their fi nancial institutions. This
article provides a unique perspective of the bailout issue by looking
at the impact of the quantitative easing in monetary policy on
competitiveness as well as providing multiplier impacts through the
use of the US 2002 I-O table. Specifi cally, three areas are considered
within this model: whether the Troubled Assets Relief Programme
(TARP)1 bailout will give rise to greater economic effi ciencies and
productivity, which would include determining whether the TARP
bailouts give rise to the survival of fi nancial institutions and the
stabilisation of the fi nancial sector; determining the direct, indirect
and induced impacts of the TARP bailout on the economy (shortterm);
and determining the long-term benefi ts of the TARP 1 bailout
on the economy (by focusing on long-term capital realisation). The
fi ndings of this econometric analysis raise questions of the validity
of government intervention in the form of bailouts.



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