The Twin Crises: The Causes of Banking and Balance of Payment Problems, American Economic Review, 89, (3), 473–500. Killoren, G.D. (2009). How Government Economic Policies Caused the Financial Crisis of 2008. Retrieved from http://rawfinanceblog.com/2009/07/23/how-lax-u-s-monetary-policy-contributed-to-the-financial-crisis Lothian, J.R. (2009). U.S. Monetary Policy and the Financial Crisis.
5. Fundamental reason for the failure of the financial systems and economic recession a. Specific government actions & intervention – Excessive money policy Current monetary policy contributed in a certain extent to the failure of financial systems and economic recession. For example, U.S. monetary policy since 2002 was too expansionary (Taylor 2009) and was a major culprit to the crisis (Jeroen 2010). The policy makers was also lack of accountability that fail to encourage optimism about the reforming the policy process itself (Adrian & Atkinson 2009).
How Have Banks Managed Their Capital – A Ratio Decomposition Analysis Abstract This paper is motivated by the conflicting evidence in prior bank capital structure literature and the lack of resilience of bank capital to the current financial crisis of 2007-2010. The paper analyzes the reaction of banks’ asset portfolio and capital structure to adverse changes of regulatory capital ratios. Based on management discretionary decisions pertaining to balance sheet items, I question whether banks respond to declines in tier 1 and total regulatory capital ratio through gaming the leverage ratio or though the risk-weighted assets. The paper employs a ratio decomposition approach, where the regulatory ratio is broken down to its components of leverage along with detailed positions in various risk-weighted asset classes. I also examine whether asset risk weighting is effective in measuring the degree of bank riskiness.
INSTABILITY IN FINANCIAL MARKETS In this section I examine four interpretations of how financial instability arises. The first interpretation deals with speculation and the subsequent “bandwagoning” in financial markets. The second is a political interpretation dealing with the declining status of a hegemonic anchor of the financial system. The question of whether regulation causes or mitigates financial instability is raised by the third interpretation; while the fourth view deals with the “trigger point” phenomena. To fully comprehend these interpretations we must first understand and differentiate between a “currency” and “contagion” crisis.
National Bureau of Economic Research - Boasson, V. (2012) The 2007 – 2009 Global Financial Crisis: A research Synthesis. Sigillum Universitatis Islandiae. - Glick, R., Hutchison, M. (2011) Currency Crises. Federal Reserve Bank of San Francisco Working Papers. - Havranek, T. , Rusnak, M. , Smidkova, K. , Vasicek, B.
Did the monetary policy of the Federal Reserve lead the financial crisis of 2007-2008? Outline Introduction Literature review and critical discussion -1. How could the Federal Reserve prevent and solve financial crisis? – The function of Federal Reserve. -2.
Meanwhile, commercial banks reduced the aggregate of bank loans in order to remain sufficient reserve and prevent their value of assets, because not enough money expand their investment to profit with high risk investing environment. Therefore, Bank of England, European Central Bank and U.S. Federal Reserve generate a series of non-standard monetary policies called unconventional monetary policies to avoid the threat of a liquidity trap (Loisel and Mesonnier, 2009). This essay will discuss what unconventional monetary policies implemented by Bank of England, European... ... middle of paper ... ...8, 2009. 5. Curdia.
Ethical corporate behavior has been a recurring issue of public policy. Recent events have brought this issue into sharp focus beginning with the Enron scandal in 2001 and more recently the financial crisis of 2008. Subsequent regulation such as the Sarbanes-Oxley act seem to be in reaction to the public clamoring for government action in the wake of painful economic outcomes. A deeper examination of the events leading up to Enron and the financial crisis both seem to indicate that government agencies were asleep at the switch. Policy such as Sarbanes-Oxley in the wake of Enron have not prevented the more recent financial crisis of 2008.
(Alessi, 2012) explains that this lower interest rates and liquidity led to an accumulation of unsustainably massive sovereign debts and deficits that posed a threat to the feasibility of the Eurozone. The issues underpinning the Eurozone crisis is that foreign-accessed capital was used to support domestic consumption rather than investments in economically productive projects. (Collignon, 2012) explains that the euro area debt crisis is a liquidity crisis that if not adequately managed could deteriorate into a solvency crisis. (Alessi, 2012) notes that the crisis brought into light the economic interdependence of the EU and the lack of political integration needed to provide a coordinated fiscal and monetary response. These two issues are discussed below.
In the 70?s U.S firms weren?t even loyal to the dollar. Sophisticated speculation playing a major role in international finance. Everyone is trying to cash in on exchange fluctuations ?leads and lags.? (I say why not) Central banks are big losers: their intervention, and inflow of dollars was so large that it was inflationary. Lesson learned is that they cannot control private capital flows.