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The 1987 stock market crash was a major systemic shock. Not only did the prices of many financial assets tumble, but market functioning was severely impaired. This paper reviews the events surrounding the crash and discusses the response of the Federal Reserve, which responded in a number of ways to support the operation of financial markets, including the provision of liquidity, in a highly visible fashion.
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The 1987 stock market crash was a major systemic shock. Not only did the prices of many financial assets tumble, but market functioning was severely impaired. This paper reviews the events surrounding the crash and discusses the response of the Federal Reserve, which responded in a number of ways to support the operation of financial markets, including the provision of liquidity, in a highly visible fashion.