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The financial crisis of 2008 in fixed-income markets

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  • Dwyer, Gerald P.
  • Tkac, Paula

Abstract

We explore how a relatively small amount of heterogeneous securities created turmoil in financial markets in much of the world in 2007 and 2008. The drivers of the financial turmoil and the Financial Crisis of 2008 were heterogeneous securities that were hard to value. These securities created concerns about counterparty risk and ultimately created substantial uncertainty. The problems spread in ways that were hard to see in advance. The run on prime money market funds in September 2008 and the effects on commercial paper were an important aspect of the crisis itself and are discussed in some detail.

Suggested Citation

  • Dwyer, Gerald P. & Tkac, Paula, 2009. "The financial crisis of 2008 in fixed-income markets," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1293-1316, December.
  • Handle: RePEc:eee:jimfin:v:28:y:2009:i:8:p:1293-1316
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    References listed on IDEAS

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    1. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," Review of Financial Studies, Society for Financial Studies, pages 2201-2238.
    2. Gorton, Gary B., 2008. "The panic of 2007," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 131-262.
    3. Dwyer Jr., Gerald P. & Samartín, Margarita, 2009. "Why do banks promise to pay par on demand?," Journal of Financial Stability, Elsevier, vol. 5(2), pages 147-169, June.
    4. Mardi Dungey & Gerald P. Dwyer & Thomas Flavin, 2009. "Vintage and credit rating: what matters in the ABX data during the credit crunch?," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
    5. Naohiko Baba & Robert N McCauley & Srichander Ramaswamy, 2009. "US dollar money market funds and non-US banks," BIS Quarterly Review, Bank for International Settlements, March.
    6. Ashcraft, Adam B. & Schuermann, Til, 2008. "Understanding the Securitization of Subprime Mortgage Credit," Foundations and Trends(R) in Finance, now publishers, vol. 2(3), pages 191-309, June.
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