IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The contribution of wealth concentration to the subprime crisis: a quantitative estimation

  • Thomas Goda

    ()

  • Photis Lysandrou

    ()

The crisis that broke out in mid-2007 was caused by the fact that the CDO market had grown to a size sufficient to wreak general havoc when it suddenly collapsed. Several authors have argued that economic inequality was important to the growth of this market. This paper attempts to strengthen this argument by concentrating attention on global wealth concentration. After summarising recent evidence on the negative impact of investor demand on US bond yields in the pre-crisis period, new evidence regarding the specific contribution of high net worth individuals to this negative impact is presented. The paper then goes on to show how, after having helped to caused a yield problem in the major US debt markets, high net worth individuals (via hedge funds) continued to be a major source of the pressure on US banks to resolve this yield problem through the mass production of CDOs

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.

File URL: http://repository.eafit.edu.co/bitstream/10784/742/1/2011_14_Thomas_Goda.pdf
Download Restriction: no

Paper provided by UNIVERSIDAD EAFIT in its series DOCUMENTOS DE TRABAJO CIEF with number 010718.

as
in new window

Length: 29
Date of creation: 10 Dec 2011
Date of revision:
Handle: RePEc:col:000122:010718
Contact details of provider:

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.:

as in new window
  1. Fidora, Michael & Fratzscher, Marcel & Thimann, Christian, 2006. "Home bias in global bond and equity markets: the role of real exchange rate volatility," Working Paper Series 0685, European Central Bank.
  2. Palma, J.G., 2011. "Homogeneous middles vs. heterogeneous tails, and the end of the ‘Inverted-U’: the share of the rich is what it's all about," Cambridge Working Papers in Economics 1111, Faculty of Economics, University of Cambridge.
  3. Bandholz, Harm & Clostermann, Joerg & Seitz, Franz, 2007. "Explaining the US Bond Yield Conundrum," MPRA Paper 2386, University Library of Munich, Germany.
  4. Adrian Blundell-Wignall, 2007. "Structured Products: Implications for Financial Markets," Financial Market Trends, OECD Publishing, vol. 2007(2), pages 27-57.
  5. José Gabriel Palma, 2009. "The revenge of the market on the rentiers," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 829-869, July.
  6. Photis Lysandrou, 2011. "The primacy of hedge funds in the subprime crisis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 34(2), pages 225-254, January.
  7. �zlem Onaran & Engelbert Stockhammer & Lucas Grafl, 2011. "Financialisation, income distribution and aggregate demand in the USA," Cambridge Journal of Economics, Oxford University Press, vol. 35(4), pages 637-661.
  8. Viral V. Acharya & Philipp Schnabl, 2010. "Do Global Banks Spread Global Imbalances? The Case of Asset-Backed Commercial Paper During the Financial Crisis of 2007-09," NBER Working Papers 16079, National Bureau of Economic Research, Inc.
  9. De Loubens, A. & Idier, J. & Jardet, C., 2007. "Determinants of long-term interest rates in the United States and the euro area: A multivariate approach," Working papers 170, Banque de France.
  10. Ricardo J. Caballero & Arvind Krishnamurthy, 2009. "Global Imbalances and Financial Fragility," NBER Working Papers 14688, National Bureau of Economic Research, Inc.
  11. Thomas Goda & Photis Lysandrou & Chris Stewart, 2011. "The contribution of us bond demand to the us bond yield conundrum of 2004 to 2007: an empirical investigation," DOCUMENTOS DE TRABAJO CIEF 010719, UNIVERSIDAD EAFIT.
  12. Mustiers, J P. & Dubois, A., 2007. "Risks and return of banking activities related to hedge funds," Financial Stability Review, Banque de France, issue 10, pages 85-94, April.
  13. Joshua Coval & Jakub Jurek & Erik Stafford, 2009. "The Economics of Structured Finance," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 3-25, Winter.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:col:000122:010718. 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: (Centro de Investigaciones Económicas y Financieras (CIEF))

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.