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The US financial system, the great recession, and the “speculative spread”


  • Hsu, Sara


The Great Recession was an enormous surprise to mainstream economists, while not as much to non-mainstream economists, due to differences in views of the financial economy and its interaction with the real economy. While policy makers continue to follow mainstream economic theory, with the implication that regulation and transparency can fix any market glitches, many remain skeptical of the ability of regulation to prevent this type of crisis in the future. Deeper restructuring of the economy, with curbs on the worst practices of speculation, are necessary to provide long-term stability. We have explored one way in which to measure speculation versus production, in what we call a “speculative spread,” and suggest that this may be an important means to understanding to what degree the economy is overfinancialized.

Suggested Citation

  • Hsu, Sara, 2012. "The US financial system, the great recession, and the “speculative spread”," MPRA Paper 38478, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38478

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    References listed on IDEAS

    1. Kalemli-Ozcan, Sebnem & Sorensen, Bent & Yesiltas, Sevcan, 2012. "Leverage across firms, banks, and countries," Journal of International Economics, Elsevier, vol. 88(2), pages 284-298.
    2. Timothy Clark & Astrid A. Dick & Beverly Hirtle & Kevin J. Stiroh & Robard Williams, 2007. "The role of retail banking in the U.S. banking industry: risk, return, and industry structure," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 39-56.
    3. Sheridan Titman & Sergey Tsyplakov, 2010. "Originator Performance, CMBS Structures, and the Risk of Commercial Mortgages," Review of Financial Studies, Society for Financial Studies, vol. 23(9), pages 3558-3594.
    4. Sanvi Avouyi-Dovi & Julien Matheron, 2005. "Interactions between business cycles, financial cycles and monetary policy: stylised facts," BIS Papers chapters,in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 273-98 Bank for International Settlements.
    5. Hsu, Sara & Li, Jianjun, 2012. "“Ideal” financial development and financial overaccumulation," MPRA Paper 38035, University Library of Munich, Germany.
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    More about this item


    Great Recession; speculation; financialization; shadow banking;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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