IDEAS home Printed from https://ideas.repec.org/p/eab/financ/22995.html
   My bibliography  Save this paper

Sub-Prime Financial Crisis and US Policy Choices

Author

Listed:
  • Yonghyup Oh

    (Korea Institute for International Economic Policy)

  • Wonho Song

Abstract

This paper argues that the subprime financial crisis reflects weakness in the real economy of the US from its start. Our comparison with prior US recessions indicates that the epicenters of most of the recessions were in the financial sector and that recessionary pressure was present in the last quarter of 2007 in the US economy. The high level of nations debts combined with a high rate of inflation show a difficult situation US policy makers face. At an international scene, there would be trade-off between protectionist policy measures and the USs role as a global sheriff. Effects of US policy measures, either monetary or fiscal, would be short-living, while more fundamental changes to create productivity gains would be the right policy for recovery of the US economy.

Suggested Citation

  • Yonghyup Oh & Wonho Song, 2008. "Sub-Prime Financial Crisis and US Policy Choices," Finance Working Papers 22995, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:22995
    as

    Download full text from publisher

    File URL: http://www.eaber.org/node/22995
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Douglas Laxton & Mr. Michael Kumhof, 2007. "A Party without a Hangover? On the Effects of U.S. Government Deficits," IMF Working Papers 2007/202, International Monetary Fund.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 US Sub-Prime Financial Crisis So Different?: An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299.
    3. Bayoumi, Tamim & Laxton, Douglas & Pesenti, Paolo, 2004. "Benefits and spillovers of greater competition in Europe: a macroeconomic assessment," Working Paper Series 341, European Central Bank.
    4. Alejandro Cuñat & Marco Maffezzoli, 2007. "Can Comparative Advantage Explain the Growth of us Trade?," Economic Journal, Royal Economic Society, vol. 117(520), pages 583-602, April.
    5. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bokan, N. & Gerali, A. & Gomes, S. & Jacquinot, P. & Pisani, M., 2018. "EAGLE-FLI: A macroeconomic model of banking and financial interdependence in the euro area," Economic Modelling, Elsevier, vol. 69(C), pages 249-280.
    2. Gomes, S. & Jacquinot, P. & Pisani, M., 2012. "The EAGLE. A model for policy analysis of macroeconomic interdependence in the euro area," Economic Modelling, Elsevier, vol. 29(5), pages 1686-1714.
    3. International Monetary Fund, 2008. "Czech Republic: Selected Issues," IMF Staff Country Reports 2008/040, International Monetary Fund.
    4. Mr. Mark J Flanagan, 2008. "Resolving a Large Contingent Fiscal Liability: Eastern European Experiences," IMF Working Papers 2008/159, International Monetary Fund.
    5. Ms. Sònia Muñoz & Céline Allard, 2008. "Challenges to Monetary Policy in the Czech Republic—An Integrated Monetary and Fiscal Analysis," IMF Working Papers 2008/072, International Monetary Fund.
    6. Douglas Laxton, 2008. "Getting to Know the Global Economy Model and Its Philosophy," IMF Staff Papers, Palgrave Macmillan, vol. 55(2), pages 213-242, June.
    7. Ingianni, Andrea, 2012. "Intra-European Union trade openness and new members’ output convergence: A time-series analysis," Economics Discussion Papers 2012-5, School of Economics, Kingston University London.
    8. Philip Stevens & Jasson Urbach & Gabrielle Wills, 2013. "Healthy Trade: The Relationship Between Open Trade and Health," Foreign Trade Review, , vol. 48(1), pages 125-135, February.
    9. Nikolay Hristov & Markus Roth, 2019. "Uncertainty Shocks and Financial Crisis Indicators," CESifo Working Paper Series 7839, CESifo.
    10. Jeffrey Frankel, 2014. "Mauritius: African Success Story," NBER Chapters, in: African Successes, Volume IV: Sustainable Growth, pages 295-342, National Bureau of Economic Research, Inc.
    11. Daisuke Ikeda & Toan Phan & Timothy Sablik, 2020. "Asset Bubbles and Global Imbalances," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 20, pages 1-4, January.
    12. Marco Hoeberichts & Ad Stokman, 2010. "Price setting behaviour in the Netherlands: results of a survey," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 135-149.
    13. Alessandra Canepa & Fawaz Khaled, 2018. "Housing, Housing Finance and Credit Risk," IJFS, MDPI, vol. 6(2), pages 1-23, May.
    14. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "Recovery from Financial Crises: Evidence from 100 Episodes," American Economic Review, American Economic Association, vol. 104(5), pages 50-55, May.
    15. Jian-Guang Shen, 2002. "Democracy and growth: An alternative empirical approach," Development and Comp Systems 0212002, University Library of Munich, Germany.
    16. Shafaeddin, Mehdi, 2010. "Trade liberalization, industrialization and development; experience of recent decades," MPRA Paper 26355, University Library of Munich, Germany.
    17. Huy Quang Doan, 2019. "Trade, Institutional Quality and Income: Empirical Evidence for Sub-Saharan Africa," Economies, MDPI, vol. 7(2), pages 1-23, May.
    18. Kym Anderson, 2005. "On the Virtues of Multilateral Trade Negotiations," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 414-438, December.
    19. Matthew B. Canzoneri & Robert E. Cumby & Behzad T. Diba, 2005. "Price- and wage- inflation targeting: variations on a theme by Erceg, Henderson, and Levin," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 181-215.
    20. Hertrich Markus, 2019. "A Novel Housing Price Misalignment Indicator for Germany," German Economic Review, De Gruyter, vol. 20(4), pages 759-794, December.

    More about this item

    Keywords

    financial crisis; Recession; inflation; sub-prime mortgage; financial regulation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eab:financ:22995. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Shiro Armstrong (email available below). General contact details of provider: https://edirc.repec.org/data/eaberau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.