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Four Myths and a Financial Crisis

Author

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  • Radu Vranceanu

    () (Economics Department - Essec Business School)

Abstract

The main driving force of the financial crisis of 2007-2009 was a rapid deterioration of the trust of private agents in the quality of financial institutions. In turn, this loss of confidence entailed the collapse of several key asset markets and a sharp decline in the other asset prices. This paper surveys the critical moments of the crisis, puts forward some of the shock amplifying mechanisms and comments on the effectiveness of various policy measures. The conclusion opens the debate on what structural changes in the existing financial architecture are required to contain such crises in the future.

Suggested Citation

  • Radu Vranceanu, 2009. "Four Myths and a Financial Crisis," Post-Print hal-00554704, HAL.
  • Handle: RePEc:hal:journl:hal-00554704
    Note: View the original document on HAL open archive server: https://hal-essec.archives-ouvertes.fr/hal-00554704
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    References listed on IDEAS

    as
    1. Paul S. Mills & John Kiff, 2007. "Money for Nothing and Checks for Free; Recent Developments in U.S. Subprime Mortgage Markets," IMF Working Papers 07/188, International Monetary Fund.
    2. Besancenot, Damien & Vrânceanu, Radu, 2010. "Financial Distress And Banks'communication Policy In Crisis Times," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 5-20, March.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299, September.
    4. Luca Gambetti & Jordi Galí, 2009. "On the Sources of the Great Moderation," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 26-57, January.
    5. Rochet, Jean-Charles & Tirole, Jean, 1996. "Interbank Lending and Systemic Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 733-762, November.
    6. Ashcraft, Adam B. & Schuermann, Til, 2008. "Understanding the Securitization of Subprime Mortgage Credit," Foundations and Trends(R) in Finance, now publishers, vol. 2(3), pages 191-309, June.
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    Cited by:

    1. Vranceanu, Radu, 2012. "The Euro sovereign debt crisis and the built-in instability of the Euro," ESSEC Working Papers WP1211, ESSEC Research Center, ESSEC Business School.
    2. Besancenot, Damien & Vranceanu, Radu, 2011. "Banks' risk race: A signaling explanation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 784-791, October.

    More about this item

    Keywords

    Banking Sector; Economic Myths; Economic Policy; Financial Crisis; Trust; Banque; Confiance; Crise financière; Equilibre multiples; Mythes économiques; Politique anti-crise;

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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