A Macroprudential Analysis of the 2008 Financial Crisis

Research Article
Open access

A Macroprudential Analysis of the 2008 Financial Crisis

Yuhan Nie 1*
  • 1 The Barstow School Jiangxi Campus    
  • *corresponding author 1811511115@mail.sit.edu.cn
Published on 10 November 2023 | https://doi.org/10.54254/2754-1169/37/20231832
AEMPS Vol.37
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-83558-095-0
ISBN (Online): 978-1-83558-096-7

Abstract

The subprime crisis of the late 2000s had a profound impact on the global financial system, triggering an economic downturn of unprecedented magnitude. This paper provides a comprehensive analysis of the causes, consequences, and lessons learned from the subprime crisis. The crisis emerged from a combination of factors, including the expansion of subprime mortgage lending, relaxed underwriting standards, and the bursting of the housing bubble. Financial institutions eagerly pursued higher profits by issuing mortgage loans to borrowers with questionable creditworthiness, leading to a surge in loan defaults and foreclosures when the housing market collapsed. The consequences of the crisis were far-reaching. It resulted in widespread financial turmoil, with significant losses incurred by interconnected institutions worldwide. The global economy experienced a severe recession, characterized by high unemployment, declining consumer and investor confidence, and disruptions across various industries. The subprime crisis highlighted critical weaknesses in risk management practices, regulatory oversight, and financial market mechanisms. However, it also served as a catalyst for reform. Policymakers implemented measures to strengthen financial systems, enhance transparency, and improve risk assessment and management. Revisions to regulatory frameworks, stricter stress testing, and reinforced consumer protection measures were among the responses.

Keywords:

subprime mortgages, risk assessment, interconnected financial institutions

Nie,Y. (2023). A Macroprudential Analysis of the 2008 Financial Crisis. Advances in Economics, Management and Political Sciences,37,55-60.
Export citation

References

[1]. Atkinson, T., Luttrell, D., & Rosenblum, H.: How Bad Was It? The Costs and Consequences of the 2007-09 Financial Crisis. Staff Papers (2013).

[2]. Erkens, D. H., Hung, M., & Matos, P.: Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance 18(2), 389–411 (2012).

[3]. Gennaioli, N., Shleifer, A., & Vishny, R.: Neglected risks, financial innovation, and financial fragility. Journal of Financial Economics 104(3), 452–468 (2012).

[4]. Taylor, J. B.: Economic policy and the financial crisis: an empirical analysis of what went wrong. Critical Review 21(2–3), 341–364 (2009).

[5]. Augustin, P.: Credit default swaps: a survey. Foundations and Trends in Finance 9(1–2), 1–196 (2014).

[6]. The Housing and Economic Recovery Act of 2008: An Analysis. https://www.sidley.com/en/insights/publications/2008/12/the-housing-and-economic-recovery-act-of-2008-an-analysis. Last accessed 2023/5/1.

[7]. Gauthier, C., Lehar, A., & Souissi, M.: Macroprudential capital requirements and systemic risk. Journal of Financial Intermediation 21(4), 594–618 (2012).

[8]. Calomiris, C. W., & Nissim, D.: Crisis-related shifts in the market valuation of banking activities. Journal of Financial Intermediation 23(3), 400–435 (2014).

[9]. Thakor, A. V.: The highs and the lows: A theory of credit risk assessment and pricing through the business cycle. Journal of Financial Intermediation 25, 1–29 (2016).

[10]. Madrid, Basel III: towards a safer financial system. Bank for International Settlements, the 3rd Santander International Banking Conference (2010).

Cite this article

Nie,Y. (2023). A Macroprudential Analysis of the 2008 Financial Crisis. Advances in Economics, Management and Political Sciences,37,55-60.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

Disclaimer/Publisher's Note

The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.

About volume

Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development

ISBN：978-1-83558-095-0(Print) / 978-1-83558-096-7(Online)
Editor：Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.37
ISSN：2754-1169(Print) / 2754-1177(Online)

© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open access policy for details).

References

[1]. Atkinson, T., Luttrell, D., & Rosenblum, H.: How Bad Was It? The Costs and Consequences of the 2007-09 Financial Crisis. Staff Papers (2013).

[2]. Erkens, D. H., Hung, M., & Matos, P.: Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance 18(2), 389–411 (2012).

[3]. Gennaioli, N., Shleifer, A., & Vishny, R.: Neglected risks, financial innovation, and financial fragility. Journal of Financial Economics 104(3), 452–468 (2012).

[4]. Taylor, J. B.: Economic policy and the financial crisis: an empirical analysis of what went wrong. Critical Review 21(2–3), 341–364 (2009).

[5]. Augustin, P.: Credit default swaps: a survey. Foundations and Trends in Finance 9(1–2), 1–196 (2014).

[6]. The Housing and Economic Recovery Act of 2008: An Analysis. https://www.sidley.com/en/insights/publications/2008/12/the-housing-and-economic-recovery-act-of-2008-an-analysis. Last accessed 2023/5/1.

[7]. Gauthier, C., Lehar, A., & Souissi, M.: Macroprudential capital requirements and systemic risk. Journal of Financial Intermediation 21(4), 594–618 (2012).

[8]. Calomiris, C. W., & Nissim, D.: Crisis-related shifts in the market valuation of banking activities. Journal of Financial Intermediation 23(3), 400–435 (2014).

[9]. Thakor, A. V.: The highs and the lows: A theory of credit risk assessment and pricing through the business cycle. Journal of Financial Intermediation 25, 1–29 (2016).

[10]. Madrid, Basel III: towards a safer financial system. Bank for International Settlements, the 3rd Santander International Banking Conference (2010).

For authors
Guide for authors Policies for authors Aims and scope Subscription Open access policy
For editors
Policies for editors Editorial board
For reviewers
Policies for reviewers Privacy policy

Cookies are used by this site.
Copyright © 2024 EWA Publishing, its licensors, and contributors. All rights reserved, including text and data mining, AI training, and similar technologies.