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External Imbalances and Financial Crises

Taylor, Alan M. - 2012

In broad perspective, there have been essentially two competing views of the global financial crisis, albeit there are some complementarities among them. One view looks across the border: it mainly blames external imbalances, the large-scale mix of unprecedented pattern current account deficits...

Persistent link: https://www.econbiz.de/10012460056

Exchange Rate Pass-Through, Monetary Policy, and Real Exchange Rates : Iceland and the 2008 Crisis

Edwards, Sebastian; Cabezas, Luis - National Bureau of Economic Research - 2021

We use detailed data for Iceland to examine two often-neglected aspects of the "exchange rate pass-through" problem … price indexes in Iceland for 2003-2019, a period that includes Iceland's banking and currency crisis of 2008. We find that … the pass-through declined around the time Iceland reformed its "flexible inflation targeting," and that the coefficients …

Persistent link: https://www.econbiz.de/10012496073

Theoretical Notes on Bubbles and the Current Crisis

Martin, Alberto - 2010

We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the...

Persistent link: https://www.econbiz.de/10012462257

Indeterminacy, Bubbles, and the Fiscal Theory of Price Level Determination

McCallum, Bennett T. - 1998

The recently-developed fiscal theory of price level determination contends that there is an important class of policy rules in which there exists a unique rational expectations solution that shows the price level to be dependent upon fiscal policy and independent of monetary variables. The...

Persistent link: https://www.econbiz.de/10012472349

Monetary Exchange in Over-the-Counter Markets : A Theory of Speculative Bubbles, the Fed Model, and Self-fulfilling Liquidity Crises

Lagos, Ricardo - 2015

We develop a model of monetary exchange in over-the-counter markets to study the effects of monetary policy on asset prices and standard measures of financial liquidity, such as bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy, both by participating in the...

Persistent link: https://www.econbiz.de/10012457141

Pride Goes Before a Fall : Federal Reserve Policy and Asset Markets

Reinhart, Carmen M. - 2011

Considerable debate rages about whether Federal Reserve policy was too lax in the early part of the 2000s, thereby fueling the home-price bubble that was the proximate cause of the global financial crisis. We present evidence that the view that modest alterations to monetary policy have vast...

Persistent link: https://www.econbiz.de/10012461842

Fiscal and Financial Crises

Bordo, Michael D. - 2016

Interconnections between banking crises and fiscal crises have a long history. We document the long-run evolution from classic banking panics towards modern banking crises where financial guarantees are associated with crisis resolution. Recent crises feature a feedback loop between bank...

Persistent link: https://www.econbiz.de/10012456615

External Constraints on Monetary Policy and the Financial Accelerator

Gertler, Mark - 2003

We develop a small open economy macroeconomic model where financial conditions influence aggregate behavior. We use this model to explore the connection between the exchange rate regime and financial distress. We show that fixed exchange rates exacerbate financial crises by tieing the hands of...

Persistent link: https://www.econbiz.de/10012468566

A "Vertical" Analysis of Crises and Intervention : Fear of Floating and Ex-ante Problems

Caballero, Ricardo - 2001

Emerging economies are prone to crises triggered by external shocks. During these crises, should the central bank stabilize the currency or domestic interest rates? If the choice is outside the central bank's control, as in a currency board, are there good policy substitutes? We argue that these...

Persistent link: https://www.econbiz.de/10012470291

Liquidity Traps : A Unified Theory of the Great Depression and Great Recession

Eggertsson, Gauti B.; Egiev, Sergey K. - National Bureau of Economic Research - 2024

This paper presents a unified framework to explain three major economic downturns: the U.S. Great Depression, the U.S. Great Recession, and Japan's Long Recession. Temporary economic disruptions, such as banking crises and excessive debt accumulation, can drive natural interest rates into...

Persistent link: https://www.econbiz.de/10015145146