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Anatomy and Lessons of the Global Financial Crisis


Author Info

  • József Móczár

    (Corvinus University of Budapest)


Emerging countries’ and particularly China's savings in the U.S. money market financed the U.S. overconsumption in the 2000s, which eventually led to the global financial crisis. The real estate mortgage market was the starting point. Non-equilibrium processes have been launched in the U.S. financial markets, which contradicted all previous theories concerning the economic equilibrium. The economic sciences do not have a model or empirically applied theories to this new situation. So the crisis could not be prevented nor predicted. The question is to what extent the existing market theories, the computational methods and the latest financial products may be responsible for the non-equilibrium. The paper examines these questions, namely the influence of the efficient market and modern portfolio theories also the Li copula function on the U.S. investment market. The problematic of moral hazard, greed, credit rating, corporate governance, limited liability and market regulation cannot be ignored neither. In conclusion, the author outlines a possible alternative measure against the outbreak of a new crise, indicates new trends in the research and draws lessons from the Hungarian economic policy.

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Bibliographic Info

Article provided by State Audit Office of Hungary in its journal Public Finance Quarterly.

Volume (Year): 55 (2010)
Issue (Month): 4 ()
Pages: 753-775

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Handle: RePEc:pfq:journl:v:55:y:2010:i:1:p:753-775

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Related research

Keywords: mortgage loans; investment fund; IMF; Federal Reserve; credit rating; efficient markets; modern portfolio theory; Li copula; morel hazard; greed;

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  1. Douglas W. Diamond & Raghuram Rajan, 2009. "The Credit Crisis: Conjectures about Causes and Remedies," NBER Working Papers 14739, National Bureau of Economic Research, Inc.
  2. Dave Colander & Peter Howitt & Alan Kirman & Axel Leijonhufvud & Perry Mehrling, 2008. "Beyond DSGE Models: Toward an Empirically Based Macroeconomics," Middlebury College Working Paper Series 0808, Middlebury College, Department of Economics.
  3. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  5. Jensen, Michael C., 1978. "Some anomalous evidence regarding market efficiency," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 95-101.
  6. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
  7. Aoki,Masanao & Yoshikawa,Hiroshi, 2007. "Reconstructing Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521831062, October.
  8. Merton, Robert C., 1972. "An Analytic Derivation of the Efficient Portfolio Frontier," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(04), pages 1851-1872, September.
  9. Voros, J. & Kriens, J. & Strijbosch, L. W. G., 1999. "A note on the kinks at the mean variance frontier," European Journal of Operational Research, Elsevier, vol. 112(1), pages 236-239, January.
  10. L. Randall Wray, 2008. "Financial Markets Meltdown: What Can We Learn from Minsky," Economics Public Policy Brief Archive ppb_94, Levy Economics Institute.
  11. Dybvig, Philip H, 1984. " Short Sales Restrictions and Kinks on the Mean Variance Frontier," Journal of Finance, American Finance Association, vol. 39(1), pages 239-44, March.
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