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Causes of the great recession of 2007–2009: The financial crisis was the symptom not the disease!

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  • Jagannathan, Ravi
  • Kapoor, Mudit
  • Schaumburg, Ernst

Abstract

Globalization has increasingly made it possible for labor in developing countries to augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. We argue that this large increase in the developed world’s effective labor supply, triggered by geo-political events and technological innovations, coupled with the inability of existing institutions in the US and developing nations themselves to cope with this shock, set the stage for the great recession. The financial crisis in the US was but the first acute symptom.

Suggested Citation

  • Jagannathan, Ravi & Kapoor, Mudit & Schaumburg, Ernst, 2013. "Causes of the great recession of 2007–2009: The financial crisis was the symptom not the disease!," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 4-29.
    • Handle: RePEc:eee:jfinin:v:22:y:2013:i:1:p:4-29
    DOI: 10.1016/j.jfi.2012.06.002
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    8. te Kaat, Daniel Marcel & Dinger, Valeriya, 2015. "Global Imbalances and Bank Risk-Taking," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112866, Verein für Socialpolitik / German Economic Association.
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