Modelling the global financial crisis
This paper models the global financial crisis as a combination of shocks to global housing markets and sharp increases in risk premia of firms, households, and international investors in an intertemporal (dynamic stochastic general equilibrium or DSGE) global model. The model has six sectors of production and trade in 15 major economies and regions. The paper shows that a 'switching' of expectations about risk premia shocks in financial markets can easily generate the severe economic contraction in global trade and production currently being experienced in 2009 and subsequent events. The results show that the future of the global economy depends critically on whether the shocks to risk are expected to be permanent or temporary. The best representation of the crisis may be one where initial long-lasting pessimism about risk is unexpectedly revised to a more moderate scenario. This suggests a rapid recovery in countries not experiencing a balance sheet adjustment problem. Copyright 2009, Oxford University Press.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Warwick J. McKibbin & Andrew Stoeckel, 2010. "The Global Financial Crisis: Causes and Consequences," Asian Economic Papers, MIT Press, vol. 9(1), pages 54-86, January.
- John B. Taylor, 2009. "The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong," NBER Working Papers 14631, National Bureau of Economic Research, Inc.
- Henderson, Dale W. & McKibbin, Warwick J., 1993.
"A comparison of some basic monetary policy regimes for open economies: implications of different degrees of instrument adjustment and wage persistence,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 39(1), pages 221-317, December.
- Dale W. Henderson & Warwick J. McKibbin, 1993. "A comparison of some basic monetary policy regimes for open economies: implications of different degrees of instrument adjustment and wage persistence," International Finance Discussion Papers 458, Board of Governors of the Federal Reserve System (U.S.).
- McKibbin, Warwick J & Vines, David, 2000. "Modelling Reality: The Need for Both Inter-temporal Optimization and Stickiness in Models for Policy-Making," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 106-37, Winter.
- McKibbin, W.J. & Wilcoxen, P.J., 1995.
"The Theoretical and Empirical Structure of the G-Cubed Model,"
118, Brookings Institution - Working Papers.
- McKibbin, Warwick J. & Wilcoxen, Peter J., 1998. "The theoretical and empirical structure of the G-Cubed model," Economic Modelling, Elsevier, vol. 16(1), pages 123-148, January.
- W. J. McKibbin & P. J. Wilcoxen, . "The Theoretical and Empirical Structure of the G-Cubed Model," Discussion Papers 118, Brookings Institution International Economics.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
- McKibbin, Warwick J. & Chanthapun, Waranya Pim, 2009.
"Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis,"
Working Papers on Regional Economic Integration
36, Asian Development Bank.
- Warwick McKibbin & Waranya Pim Chanthapun, 2009. "Exchange Rate Regimes in the Asia-Pacific Region and the Global Financial Crisis," CAMA Working Papers 2009-30, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- McKibbin, Warwick J. & Pearce, David & Stegman, Alison, 2007. "Long term projections of carbon emissions," International Journal of Forecasting, Elsevier, vol. 23(4), pages 637-653.
- McKibbin, Warwick J. & Stoeckel, Andrew, 2009. "The potential impact of the global financial crisis on world trade," Policy Research Working Paper Series 5134, The World Bank.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, June.
When requesting a correction, please mention this item's handle: RePEc:oup:oxford:v:25:y:2009:i:4:p:581-607. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.