Close this search box.

Table of Contents

Keynesian Put


The Keynesian Put refers to the idea that government fiscal and monetary policies, inspired by John Maynard Keynes, can prevent or mitigate economic downturns by stimulating demand through increased spending, lower taxes, or lower interest rates. In essence, it is a safety net provided by policymakers to support economies during times of crisis. The term “put” originates from put options in finance, which allows the holder to sell an asset at a predetermined price, providing protection when asset values decline.



Key Takeaways

  1. Keynesian Put refers to the concept that governments and central banks intervene in the economy to stabilize it during economic downturns, following the principles of Keynesian economics.
  2. This intervention usually includes government spending, lowering interest rates, and implementing fiscal policies to stimulate demand and boost economic growth.
  3. The idea behind Keynesian Put is to counteract the negative effects of recessionary cycles and maintain full employment, thus achieving economic stability over time.


The Keynesian Put is an important concept in business and finance as it reflects the belief that central banks and governments will proactively intervene to stimulate the economy through monetary and fiscal policies during economic downturns. Originating from the economic theories of John Maynard Keynes, the term suggests that investors can expect some degree of protection and softened economic impacts in the market due to these measures. This confidence can lead to increased investment and risk-taking, while supporting financial stability and growth in the long term. Consequently, the Keynesian Put plays a crucial role in shaping investor behavior, financial market dynamics, and guiding policy decisions.


The Keynesian Put refers to an economic policy strategy which, at its core, aims to stabilize the economic growth and support markets during periods of downturn. Attributed to the British economist John Maynard Keynes, this policy intervention mechanism is principally centered around the idea that governments and central banks have the ability to influence aggregate demand in the economy through various fiscal and monetary policy measures. These measures may include lowering interest rates, increasing government spending, and initiating stimulus programs to boost the overall economic activity during unfavorable economic conditions such as recessions or depressions. By stimulating demand, the Keynesian Put strives to help businesses recover, maintain employment levels, and restore investor confidence in the market. In practical terms, the Keynesian Put is deployed by governments and central banks as a form of insurance policy against economic downturns. When businesses and consumers cut back on their spending due to uncertainties or weaker economic prospects, this tends to create a negative chain reaction within the economy, causing reduced income, job losses, and further contraction in demand. At this point, the Keynesian Put comes into play, providing an economic cushion to minimize the severity of such adverse cycles. By implementing fiscal and monetary stimulus measures, the authorities essentially step in to pick up the slack left by the private sector, thus helping to stabilize the market, support economic activity, and mitigate potential repercussions across the financial system. This active engagement by policymakers also sends a psychological signal to investors that the government stands ready to intervene in the face of economic challenges, promoting a sense of safety and encouraging a long-term bullish market sentiment.


The Keynesian Put is a financial term referring to the expectation that government intervention and fiscal policy will help stabilize and stimulate demand during economic downturns. It is rooted in the economic theory of John Maynard Keynes, who advocated for government intervention in the economy to manage demand-side issues. Here are three real-world examples of the Keynesian Put: 1. The United States’ response to the Great Depression: President Franklin D. Roosevelt implemented a series of programs and policies, collectively known as the New Deal, to combat the devastating effects of the Great Depression. These measures, such as the Civilian Conservation Corps (CCC) and the Works Progress Administration (WPA), helped increase employment, income, and spending, thus providing a “Keynesian Put” to stabilize the economy. 2. Japan’s economic stimulus in the 1990s: Faced with a prolonged recession, Japan implemented a series of fiscal stimulus packages in an attempt to jumpstart their economy. Known as the “Lost Decade,” these measures included financial bailouts, large-scale public works projects, and temporary tax cuts, all aimed at providing a Keynesian Put to boost demand and reduce unemployment. 3. Global response to the 2008 financial crisis: Governments around the world, including the United States, implemented various fiscal stimulus measures to counteract the severe economic downturn caused by the 2008 financial crisis. These measures included tax cuts, infrastructure spending, and the Troubled Asset Relief Program (TARP) in the United States, all intended to provide a Keynesian Put that would support demand, stabilize financial markets, and spur economic recovery.

Frequently Asked Questions(FAQ)

What is a Keynesian Put?
A Keynesian Put refers to the expectation that government fiscal stimulus, inspired by the ideas of economist John Maynard Keynes, will be used to counteract economic downturns or recessions. This government action is said to provide a “safety net” for investors, supporting market demand and stabilizing prices.
How does a Keynesian Put work?
During an economic downturn, the government increases spending or reduces taxes in order to stimulate consumer demand. This can help to create jobs and lead to economic recovery. Corporate profits may increase as a result of the stimulus, leading to higher stock prices and benefiting investors.
Who was John Maynard Keynes?
John Maynard Keynes was a British economist (1883-1946) whose theories on government intervention, fiscal policy, and countercyclical spending during recessions or depressions shaped modern economics. His ideas represented a departure from classical economics and laid the groundwork for Keynesian economics.
What is Keynesian economics?
Keynesian economics is a macroeconomic theory that proposes that government intervention, particularly in the form of fiscal policy, can help stabilize the economy during periods of high unemployment and low growth. It emphasizes demand-side factors as the primary drivers of the economy and supports government spending and tax policies as ways to counteract periods of economic downturn.
Why is it called a “Keynesian Put”?
The term “put” is derived from an option contract in finance, which gives the holder the right (but not the obligation) to sell a security at a specified price before a certain date. The analogy in this context is that government intervention during economic downturns can protect or “put a floor under” asset prices, much like a put option would.
Is the Keynesian Put always successful?
The efficacy of a Keynesian Put is debated among economists. Critics argue that government intervention may cause unintended consequences, such as inflation, inefficient allocation of resources, or unsustainable national debt. Others contend that fiscal stimulus can help speed up recovery and stabilize financial markets during periods of economic stress.

Related Finance Terms

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More