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Four Myths and a Financial Crisis

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  • Vranceanu, Radu

    ()
    (ESSEC Business School)

Abstract

The main driving force of the financial crisis of 2007-2009 was a rapid deterioration of the trust of private agents in the quality of financial institutions. In turn, this loss of confidence entailed the collapse of several key asset markets and a sharp decline in the other asset prices. This paper surveys the critical moments of the crisis, puts forward some of the shock amplifying mechanisms and comments on the effectiveness of various policy measures. The conclusion opens the debate on what structural changes in the existing financial architecture are required to contain such crises in the future.

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Bibliographic Info

Paper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 09006.

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Length: 21 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:ebg:essewp:dr-09006

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Postal: ESSEC Research Center, BP 105, 95021 Cergy, France
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Web page: http://www.essec.edu/
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Related research

Keywords: Banking Sector; Economic Myths; Economic Policy; Financial Crisis; Trust;

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  1. Besancenot, Damien & Vrânceanu, Radu, 2010. "Financial Distress And Banks'communication Policy In Crisis Times," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 5-20, March.
  2. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "Is the 2007 US Sub-prime Financial Crisis So Different? An International Historical Comparison," American Economic Review, American Economic Association, vol. 98(2), pages 339-44, May.
  3. Galí, Jordi & Gambetti, Luca, 2008. "On the Sources of the Great Moderation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6632, C.E.P.R. Discussion Papers.
  4. Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 28(4), pages 733-62, November.
  5. Adam B. Ashcraft & Til Schuermann, 2008. "Understanding the securitization of subprime mortgage credit," Staff Reports 318, Federal Reserve Bank of New York.
  6. Paul S. Mills & John Kiff, 2007. "Money for Nothing and Checks for Free," IMF Working Papers 07/188, International Monetary Fund.
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Cited by:
  1. Radu Vranceanu & Damien Besancenot, 2010. "Banks' risk race: A signaling explanation," Post-Print hal-00554719, HAL.
  2. Radu Vranceanu, 2013. "The Euro Sovereign Debt Crisis and the Built-in Instability of the Euro," Working Papers hal-00766691, HAL.
  3. repec:hal:wpaper:halshs-00424214 is not listed on IDEAS

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