The Sales Impact of the Cash for Clunker Program

Abstract

In December 2007, the United States entered an economic recession, which lasted 18 months ending in June 2009. The recession of 2007-2009 was combined with the financial crisis, which culminated in the longest recession the U.S. had endured since the Great Depression. The recession was due to multiple factors, which included increased oil prices from 2003 through 2008, and over-inflated U.S. home values from 1997 to 2006. The financial crisis stemmed from the sharp declined in U.S. mortgage security values that began in 2007, combined with the over investment in these securities by many U.S. financial institutions. The effects of the recession combined with the financial crisis led to a major declined in the U.S. economy, including the automobile industry. The impact of these events led the U.S. government to take action in the form of both monetary and fiscal policies in 2008 and 2009. The aim of these policies was to repair the financial sector as well as increase consumption to combat the recession.