Financial Crisis American Style
This paper reviews some of the research on the causes of the financial crisis of 2008-09, highlights the key events that triggered a financial panic in September 2008, and summarizes the key policy actions that the United States has taken to ameliorate the crisis. We document the characteristics and growth of the sub-prime mortgage market, and the distorted incentives and flawed regulatory structure surrounding the secondary market for mortgage-backed securities. We also assess the role for macroeconomic determinants of the crisis that serve to explain the bubble in U.S. asset prices, most notably low global interest rates attributed to either loose monetary policy or excess global saving. Although low global interest rates may have contributed to the boom in housing markets and speculative excesses, we believe that the financial innovations and microeconomic distortions played a more fundamental role. Finally, a recovery marked by higher private saving, weak domestic investment, and a large public deficit appears to be unsustainable. Ultimately, the U.S. economy will need to shift about 3 percent of GDP from domestic consumption to the export sector. This will pose some serious challenges to Asian economies that have come to rely on exports to the U.S. market. (c) 2009 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.
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.
Volume (Year): 8 (2009)
Issue (Month): 3 (October)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://www.mitpressjournals.org/loi/asep|
When requesting a correction, please mention this item's handle: RePEc:tpr:asiaec:v:8:y:2009:i:3:p:146-170. 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: (Kristin Waites)
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.