IDEAS home Printed from
   My bibliography  Save this article

The 2008 World Financial Crisis and Market Quality Theory


  • Makoto Yano

    (Kyoto University and Keio University, Kyoto Institute of Economic Research, Yoshida-honcho, Sakyo-ku, Kyoto 606-8501, Japan.)


The present study demonstrates that the current world financial crisis is attributable to, among other things, the failure to coordinate Japanese and U.S. monetary policies in 2004, allowing Japan to abandon its currency intervention while pegging its interest rate at zero at the same time that the United States departed from its low interest rate policy. At a deeper level, these factors can be explained by the productivity increases resulting from the internet technology revolution, which lowered market quality by rendering obsolete the market infrastructure built in the latter half of the twentieth century. (c) 2010 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Makoto Yano, 2010. "The 2008 World Financial Crisis and Market Quality Theory," Asian Economic Papers, MIT Press, vol. 9(3), pages 174-194, Fall.
  • Handle: RePEc:tpr:asiaec:v:9:y:2010:i:3:p:174-194

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Guariglia, Alessandra & Liu, Xiaoxuan & Song, Lina, 2011. "Internal finance and growth: Microeconometric evidence on Chinese firms," Journal of Development Economics, Elsevier, vol. 96(1), pages 79-94, September.
    2. Knight, John & Song, Lina, 1999. "The Rural-Urban Divide: Economic Disparities and Interactions in China," OUP Catalogue, Oxford University Press, number 9780198293309, June.
    3. Sai Ding & John Knight, 2011. "Why has China Grown So Fast? The Role of Physical and Human Capital Formation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(2), pages 141-174, April.
    4. Knight, John, 1995. "Price Scissors and Intersectoral Resource Transfers: Who Paid for Industrialization in China?," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 117-135, January.
    5. Wurgler, Jeffrey, 2000. "Financial markets and the allocation of capital," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 187-214.
    6. Paul De Grauwe, 2008. "Animal Spirits and Monetary Policy," CESifo Working Paper Series 2418, CESifo Group Munich.
    7. Cull, Robert & Xu, Lixin Colin, 2005. "Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms," Journal of Financial Economics, Elsevier, vol. 77(1), pages 117-146, July.
    8. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    9. Zou, Heng-fu, 1991. "Socialist economic growth and political investment cycles," European Journal of Political Economy, Elsevier, vol. 7(2), pages 141-157, July.
    10. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
    11. Cull, Robert & Xu, Lixin Colin & Zhu, Tian, 2009. "Formal finance and trade credit during China's transition," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 173-192, April.
    12. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511-564.
    13. Loren Brandt & Xiaodong Zhu, 2000. "Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 422-451, April.
    14. John Knight & Sai Ding, 2008. "Why has China Grown so Fast? The Role of Structural Change," Economics Series Working Papers 415, University of Oxford, Department of Economics.
    15. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    16. Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 61-102.
    17. Ding, Sai & Knight, John, 2009. "Can the augmented Solow model explain China's remarkable economic growth? A cross-country panel data analysis," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 432-452, September.
    18. Sean Dougherty & Richard Herd, 2005. "Fast-Falling Barriers and Growing Concentration: The Emergence of a Private Economy in China," OECD Economics Department Working Papers 471, OECD Publishing.
    19. Guariglia, Alessandra & Poncet, Sandra, 2008. "Could financial distortions be no impediment to economic growth after all? Evidence from China," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 633-657, December.
    20. Paul R. Masson, 2008. "Monetary Policy," Chapters,in: International Handbook of Development Economics, Volumes 1 & 2, chapter 54 Edward Elgar Publishing.
    21. Hay, Donald & Morris, Derek & Liu, Guy & Yao, Shujie, 1994. "Economic Reform and State-Owned Enterprises in China 1979-87," OUP Catalogue, Oxford University Press, number 9780198288459, June.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:asiaec:v:9:y:2010:i:3:p:174-194. 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). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.