131 Global Imbalances and the Financial Crisis: Products of Common Causes

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131 Global Imbalances and the Financial Crisis: Products of Common Causes

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by Maurice Obstfeld , Kenneth Rogoff

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77 - 5 self

BibTeX

@MISC{Obstfeld_131global,
    author = {Maurice Obstfeld and Kenneth Rogoff},
    title = {131 Global Imbalances and the Financial Crisis: Products of Common Causes},
    year = {}
}

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Abstract

This paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both have their origins in economic policies followed in a number of countries in the 2000s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets. In the U.S., the interaction among the Fed’s monetary stance, global real interest rates, credit market distortions, and financial innovation created the toxic mix of conditions making the U.S. the epicenter of the global financial crisis. Outside the U.S., exchange rate and other economic policies followed by emerging markets such as China contributed to the United States ’ ability to borrow cheaply abroad and thereby finance its unsustainable housing bubble. In my view... it is impossible to understand this crisis without reference to the global imbalances in trade and capital flows that began in the latter half of the 1990s. —Ben S. Bernanke (2009) 1.

Keyphrases

global imbalance financial crisis common cause economic policy monetary stance unsustainable housing bubble toxic mix global real interest rate credit market distortion global financial market latter half exchange rate global financial crisis united state ability capital flow financial innovation recent global financial crisis

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