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Expected worsening or improving financial instability and the 2008 financial crisis

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  • Agarwal, Manmohan
  • Walsh, Sean
  • Wang, Jing
  • Whalley, John
  • Yan, Chen

Abstract

We focus on the external sector component of financial instability and link changes in country imbalances to GDP growth rates in ways to produce indices of expected worsening or improving financial instability at different points in time. Our results suggest that depending upon the index used and the base date chosen for comparison, different implications emerge for the linkage between external sector imbalances, perceived future instability and hence the possible onset of a financial crisis. The implication we drawn is that links between imbalances and best policy response to 2008 crisis asserted by the G20 may be more tenuous than claimed.

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Bibliographic Info

Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 26 (2013)
Issue (Month): C ()
Pages: 92-105

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Handle: RePEc:eee:ecofin:v:26:y:2013:i:c:p:92-105

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Web page: http://www.elsevier.com/locate/inca/620163

Related research

Keywords: External sector imbalances; Financial instability; Index approach; Financial crisis;

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  1. Obstfeld, Maurice & Rogoff, Kenneth, 2009. "Global Imbalances and the Financial Crisis: Products of Common Causes," CEPR Discussion Papers 7606, C.E.P.R. Discussion Papers.
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  5. Jan Kregel, 2008. "Financial Flows and International Imbalances--The Role of Catching-up by Late Industrializing Developing Countries," Economics Working Paper Archive wp_528, Levy Economics Institute.
  6. Tobias Adrian & Hyun Song Shin, 2010. "The Changing Nature of Financial Intermediation and the Financial Crisis of 2007–2009," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 603-618, 09.
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  8. �scar Jord� & Moritz Schularick & Alan M Taylor, 2011. "Financial Crises, Credit Booms, and External Imbalances: 140 Years of Lessons," IMF Economic Review, Palgrave Macmillan, vol. 59(2), pages 340-378, June.
  9. Meta Brown & Andrew Haughwout & Donghoon Lee & Wilbert van der Klaauw, 2010. "The financial crisis at the kitchen table: trends in household debt and credit," Staff Reports 480, Federal Reserve Bank of New York.
  10. Tobin, James, 1975. "Keynesian Models of Recession and Depression," American Economic Review, American Economic Association, vol. 65(2), pages 195-202, May.
  11. Mary Amiti & David E. Weinstein, 2009. "Exports and Financial Shocks," NBER Working Papers 15556, National Bureau of Economic Research, Inc.
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