Abstract
The aim of this paper is to present an international finance view of the 2008 crisis. By relying on four traditional international finance classes of models (the intertemporal current account approach, two exchange rate risk premium models and open-economy economic policy models), we addresed, theoretically, the importance of macro-finance aspects of the episode such as portfolio reallocation and its aggregate effects, using data for supporting the claims. Moreover, by telling the story of the crisis, divided in three periods (Great Moderation, Great Recession and Euro Crisis) we provided an overview of the deployments as well as an understanding of the development from a slightly point of view.
Highlights
Dealing with financial crises is not a new feature of capitalist economies
An unlikely crisis hit the world economy (Costa Filho, 2015) emerging from problems in the US housing market, spreading to the rest of the world throughout a complex derivatives network and the economic policy responding to the fall Brunnermeier (2009)
It is precisely the transmission and international impact of the crisis that is addressed in this paper and can be summarized in the following research question: from the international finance lens, how can one explain the financial crisis and its aftermath? In order to answer this question, I used four international finance models and this paper presents the overview of the macro-financial events before, during and after the Great Financial Crisis
Summary
Dealing with financial crises is not a new feature of capitalist economies. Since the end of Bretton Woods the frequency of crises has increased (Eichengreen, 2002). An unlikely crisis hit the world economy (Costa Filho, 2015) emerging from problems in the US housing market, spreading to the rest of the world throughout a complex derivatives network and the economic policy responding to the fall Brunnermeier (2009). It is precisely the transmission and international impact of the crisis that is addressed in this paper and can be summarized in the following research question: from the international finance lens, how can one explain the financial crisis and its aftermath?
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