Keynesian Put

DEFINITION of 'Keynesian Put'

A Keynesian Put is the expectation that markets and the economy will be supported by fiscal policy stimulus measures. Fiscal policy stimulus, including reductions in taxes and increased government spending, are generally aimed at giving a direct boost to the real economy, although financial markets should also expect the indirect benefits of strengthening economic growth.

BREAKING DOWN 'Keynesian Put'

The term was coined by analysts at Bank of America Merrill Lynch in 2016. It is both a reference to the economic theory of 20th century British economist John Maynard Keynes and a play on the term Greenspan Put, which was first used in 1998 to describe the extremely accommodative monetary policies of then Federal Reserve Chairman, Alan Greenspan.

While accommodative monetary policy in the form of lower interest rates is meant to act as a stimulus to the real economy as well, since the 2007-2008 global financial crisis global central banks have adopted extreme accommodative policies that have helped push up the price of risk assets but with limited results for the real economy.

In this context, renewed support for Keynesian-style fiscal stimulus measures have lead to expectations that governments around the world will use their spending power to boost the economy, and in turn help support asset prices.