- A cross-country perspective on the causes of the global financial crisis
- Book title
- The evidence and impact of financial globalization
- Pages (from-to)
- Boston etc.: Elsevier / Academic Press
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam Business School Research Institute (ABS-RI)
The global financial crisis is rooted in a combination of factors common to previous financial crises and some new factors. The four features in common with other crises are (1) asset price increases that turned out to be unsustainable, (2) credit booms that led to excessive debt burdens, (3) buildup of marginal loans and systemic risk, and (4) the failure of regulation and supervision to keep up with and get ahead of the crisis when it erupted. Four key new aspects were (1) the widespread use of complex and opaque financial instruments; (2) the increased interconnectedness among financial markets, nationally and internationally, with the United States at the core; (3) the high degree of leverage of financial institutions; and (4) the central role of the household sector. The chapter also describes the evolution of the crisis, including the different stages of crisis containment, and reviews the main government interventions (until mid-2009) to restore confidence in financial systems.
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