Four Myths and a Financial Crisis

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Four Myths and a Financial Crisis

Author Info

Vranceanu, Radu () (ESSEC Business School)

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Radu Vranceanu

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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Publisher 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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Find related papers by JEL classification:
E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
G20 - Financial Economics - - Financial Institutions and Services - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-10-31 (All new papers)
NEP-FMK-2009-10-31 (Financial Markets)
NEP-MAC-2009-10-31 (Macroeconomics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Paul S. Mills & John Kiff, 2007. "Money for Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets," IMF Working Papers 07/188, International Monetary Fund. [Downloadable!]
Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
Other versions:
- Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 733-62, November. [Downloadable!] (restricted)
Besancenot, Damien & Vranceanu, Radu, 2008. "Financial distress and banks' communication policy in crisis times," ESSEC Working Papers DR 08018, ESSEC Research Center, ESSEC Business School. [Downloadable!]
Adam B. Ashcraft & Til Schuermann, 2008. "Understanding the securitization of subprime mortgage credit," Staff Reports 318, Federal Reserve Bank of New York. [Downloadable!]

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