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The Financial Crisis – Explaining The Costs

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  • ROTARU, Livia Maria

    (Academy of Economic Studies, Bucharest, Romania)

Abstract

There is a significant literature related to the causes of the recent financial crisis, but the costs and measures that it involved are still under discussion. The recent turmoil has proved to be more costly in terms of GDP growth and public debt. The smaller fiscal costs were due, in part, to large economies that had the necessary flexibility to intervene. The existing regulations did not pay enough attention to the economy as a whole, but rather to each financial institution, and moreover, it did not consider the interaction between financial and price stability. An assessment of the situation should take into consideration not only the direct costs such as capital infusion or emergency liquidity, but also the indirect cost like less tax revenue, higher budget spending or increased interest rates for existing debt. Each country reacted differently to this shock, but there is a universal consensus that the regulations must be changed to prevent future problems.

Suggested Citation

  • ROTARU, Livia Maria, 2014. "The Financial Crisis – Explaining The Costs," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 1(1), pages 187-193.
  • Handle: RePEc:vls:rojfme:v:1:y:2014:i:1:p:187-193
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    References listed on IDEAS

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    More about this item

    Keywords

    financial crisis; macroprudential policies; financial costs; financial stability; price stability;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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