Chapter

America’s Financial Crisis: The End of an Era

Barry Bosworth and Aaron Flaaen

in The Global Financial Crisis and Asia

Published in print October 2012 | ISBN: 9780199660957
Published online January 2013 | e-ISBN: 9780191748981 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199660957.003.0002
America’s Financial Crisis: The End of an Era

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This chapter reviews research on the origins of the financial crisis of 2008–2009, highlights the key events that triggered a financial panic in September 2008, and summarizes the extraordinary policy actions the United States (US) has taken to ameliorate the crisis. It discusses the proximate causes of the crisis, including the characteristics and growth of the subprime mortgage market, and the distorted incentives and flawed regulatory structure surrounding the secondary market for mortgage-backed securities. It also assesses the role of more fundamental macroeconomic determinants of the bubble in US asset prices, most notably low global interest rates attributed to either loose monetary policy or excess global saving

Keywords: financial crisis; price bubble; causes of crisis; subprime mortgage market; mortgage-backed securities

Chapter.  9852 words.  Illustrated.

Subjects: Financial Markets

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