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The Global Financial Crisis

In: Monetary Policy under Financial Turbulence

Author

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  • Franklin Allen

    (University of Pennsylvania)

  • Elena Carletti

    (European University Institute)

Abstract

Until Lehman Brothers' bankruptcy in September 2008, the conventional wisdom was that the crisis was the result of problems in the financial sector. However, after the dramatic falls in industrial production in countries such as Japan and Germany starting in the last quarter of 2008, it became clear that the origins of the crisis were deeper. This paper argues that there was an economic crisis that was due to the bursting of a property and stock bubble in the US and a number of other countries. Just as in Japan in the 1990's, this greatly affected the real economy. The problems in the financial system were a symptom rather than a cause, but there was a strong feedback effect into the real economy. The structure of the global financial system and the nature of banking regulation have been severely inadequate. The paper suggests reforms in the structure of the IMF, the governance of central banks and the form of banking regulation.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Franklin Allen & Elena Carletti, 2011. "The Global Financial Crisis," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Roberto Chang & Diego Saravia (ed.),Monetary Policy under Financial Turbulence, edition 1, volume 16, chapter 2, pages 023-047, Central Bank of Chile.
    • Handle: RePEc:chb:bcchsb:v16c02pp023-047
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
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    5. Ms. Elena Loukoianova & Mr. Gianni De Nicolo & John H. Boyd, 2009. "Banking Crises and Crisis Dating: Theory and Evidence," IMF Working Papers 2009/141, International Monetary Fund.
    6. Christopher Mayer & Karen Pence & Shane M. Sherlund, 2009. "The Rise in Mortgage Defaults," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 27-50, Winter.
    7. Reinhart, Carmen M. & Rogoff, Kenneth S., 2013. "Banking crises: An equal opportunity menace," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4557-4573.
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    Cited by:

    1. Kevin Davis, 2011. "The Australian Financial System in the 2000s: Dodging the Bullet," RBA Annual Conference Volume (Discontinued), in: Hugo Gerard & Jonathan Kearns (ed.),The Australian Economy in the 2000s, Reserve Bank of Australia.
    2. John Wanna & Evert A. Lindquist & Jouke de Vries (ed.), 2015. "The Global Financial Crisis and its Budget Impacts in OECD Nations," Books, Edward Elgar Publishing, number 16601.
    3. Bertinelli, Luisito & Camacho, Carmen & Zou, Benteng, 2014. "Carbon capture and storage and transboundary pollution: A differential game approach," European Journal of Operational Research, Elsevier, vol. 237(2), pages 721-728.
    4. Xavier Vives, 2011. "Competition and Stability in Banking," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Roberto Chang & Diego Saravia (ed.),Monetary Policy under Financial Turbulence, edition 1, volume 16, chapter 12, pages 455-502, Central Bank of Chile.
    5. Broz, Lawrence, 2015. "The Federal Reserve as global lender of last resort, 2007-2010," LSE Research Online Documents on Economics 60951, London School of Economics and Political Science, LSE Library.
    6. Miller, Marcus & Zhang, Lei, 2019. "Externalities and financial crisis - enough to cause collapse?," CEPR Discussion Papers 13834, C.E.P.R. Discussion Papers.
    7. Darcy W E Allen & Alastair Berg & Chris Berg & Brendan Markey-Towler & Jason Potts, 2019. "Some economic consequences of the GDPR," Economics Bulletin, AccessEcon, vol. 39(2), pages 785-797.
    8. Kalemli-Ozcan, Sebnem & Papaioannou, Elias & Perri, Fabrizio, 2013. "Global banks and crisis transmission," Journal of International Economics, Elsevier, vol. 89(2), pages 495-510.
    9. Changyong Rhee & Lea Sumulong & Shahin Vallée, 2013. "Global and regional financial safety nets- lessons from Europe and Asia," Bruegel Working Papers 801, Bruegel.
    10. Campanari, S. & Chiesa, P. & Manzolini, G. & Bedogni, S., 2014. "Economic analysis of CO2 capture from natural gas combined cycles using Molten Carbonate Fuel Cells," Applied Energy, Elsevier, vol. 130(C), pages 562-573.
    11. Eric M. Leeper, 2009. "Anchors Away: How Fiscal Policy Can Undermine “Good” Monetary Policy," CAEPR Working Papers 2009-021, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    12. Roszkowska Paulina & Prorokowski Łukasz, 2013. "Model of Financial Crisis Contagion: A Survey-based Simulation by Means of the Modified Kaplan-Meier Survival Plots," Folia Oeconomica Stetinensia, Sciendo, vol. 13(1), pages 22-55, December.
    13. Helena Liu, 2017. "The Masculinisation of Ethical Leadership Dis/embodiment," Journal of Business Ethics, Springer, vol. 144(2), pages 263-278, August.
    14. Priscila G. Castro & Antônio C. Campos, 2017. "FDI and the Subprime Crisis: An Analysis for Asian and Latin American Countries," International Business Research, Canadian Center of Science and Education, vol. 10(11), pages 206-218, November.
    15. Frank Milne, 2012. "Economic Crises: The Impact On Australia And Canada," Working Paper 1296, Economics Department, Queen's University.
    16. Piero Pasotti & Alessandro Vercelli, 2015. "Kindleberger and Financial Crises," Working papers wpaper104, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.

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