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Sub-Prime Financial Crisis and US Policy Choices

Author

Listed:
  • Yonghyup Oh

    (Korea Institute for International Economic Policy)

  • Wonho Song

Abstract

This paper argues that the subprime financial crisis reflects weakness in the real economy of the US from its start. Our comparison with prior US recessions indicates that the epicenters of most of the recessions were in the financial sector and that recessionary pressure was present in the last quarter of 2007 in the US economy. The high level of nations debts combined with a high rate of inflation show a difficult situation US policy makers face. At an international scene, there would be trade-off between protectionist policy measures and the USs role as a global sheriff. Effects of US policy measures, either monetary or fiscal, would be short-living, while more fundamental changes to create productivity gains would be the right policy for recovery of the US economy.

Suggested Citation

  • Yonghyup Oh & Wonho Song, 2008. "Sub-Prime Financial Crisis and US Policy Choices," Finance Working Papers 22995, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:22995
    as

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    File URL: http://www.eaber.org/node/22995
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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