Prone to Fail: The Pre-Crisis Financial System

  title={Prone to Fail: The Pre-Crisis Financial System},
  author={Darrell Duffie},
  journal={ERN: Other Monetary Economics: Financial System \& Institutions (Topic)},
  • D. Duffie
  • Published 19 July 2018
  • Economics
  • ERN: Other Monetary Economics: Financial System & Institutions (Topic)
The financial crisis that began in 2007 was triggered by over-leveraged homeowners and a severe downturn in US housing markets. However, a reasonably well-supervised financial system would have been much more resilient to this and other types of severe shocks. Instead, the core of the financial system became a key channel of propagation and magnification of losses suffered in the housing market. Critical financial intermediaries failed, or were bailed out, or dramatically reduced their… 
What Happened: Financial Factors in the Great Recession
At the onset of the recent global financial crisis, the workhorse macroeconomic models assumed frictionless financial markets. These frameworks were thus not able to anticipate the crisis, nor to
The Influence of Capital Requirement of Basel III Adoption on Banks’ Operating Efficiency: Evidence from U.S. Banks
Abstract The United States is recognized as the largest economic entity in the world and its financial system has developed steadily through the guidance of the Federal Reserve System for over one
The Role of ABS CDOs in the Financial Crisis
We examine the role of asset-backed security collateralized debt obligations (ABS CDOs) as a primary catalyst for the financial crisis. We show how ABS CDOs became the main investment vehicle for the
A Decade After the 2009 Global Recession: Macroeconomic Developments
  • W. Koh, Shu Yu
  • Economics
    Journal of International Commerce, Economics and Policy
  • 2020
Emerging market and developing economies (EMDEs) weathered the 2009 global recession relatively well. However, the impact of the global recession varied across economies. EMDEs with stronger
The Miner of Last Resort: Digital Currency, Shadow Money and the Role of the Central Bank
Cryptocurrency arose, and grew in popularity, following the financial crisis of 2008 built upon a promise of decentralizing money and payments. An examination of the history of money and banking the
Government-Cheerleading Bias in Money and Banking Textbooks
This paper investigates the six textbooks most commonly adopted in U.S. undergraduate money and banking courses for how they describe the influences that commercial banks and central banks have on
Financial conservatism, firm value and international business risk: Evidence from emerging economies around the global financial crisis
The increase in debt-free or under-levered firms (financial conservatism) is one of the most recent stylised puzzles that cannot be explained within the context of extant capital structure theories.
Banking system stability: A prerequisite for financing the Sustainable Development Goals in Nigeria
The banking system, which has been the fulcrum of funding for Nigeria’s economy, is plagued by instability in the face of a growing amount of non-performing loans. This is examined in the current
Global Waves of Debt: Causes and Consequences
ADVANCE EDITION OF BOOK EXPECTED IN 2020. The global economy has experienced four waves of debt accumulation over the past fifty years. The first three debt waves ended with financial crises in many
Financial Intermediary Leverage and Unemployment
I establish that financial intermediary leverage and unemployment are closely related and build a model that combines frictions on financial intermediaries with labor search and matching to explain


The Real Effects of Disrupted Credit: Evidence from the Global Financial Crisis
ABSTRACT:Economists both failed to predict the global financial crisis and underestimated its consequences for the broader economy. Focusing on the second of these failures, this paper makes two
What Happened: Financial Factors in the Great Recession
At the onset of the recent global financial crisis, the workhorse macroeconomic models assumed frictionless financial markets. These frameworks were thus not able to anticipate the crisis, nor to
Financial Regulatory Reform After the Crisis: An Assessment
This is a survey of progress with the postcrisis global (G20) reform of the financial system, in five key areas of new regulation: (1) making financial institutions more resilient; (2) ending
Replumbing Our Financial System: Uneven Progress
We introduce large-scale asset purchases (LSAPs) as a monetary policy tool within a macroeconomic model.We allow for purchases of both long-term government bonds and securities with some private
House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again
This work constitutes a detailed analysis of the latest financial crisis and provides all the necessary tools in order for us to be prepared in future similar cases.
When Safe Proved Risky: Commercial Paper During the Financial Crisis of 2007-2009
Commercial paper is one of the largest money market instruments and has long been viewed as a safe haven for investors seeking low risk. However, during the financial crisis of 2007-2009, the
Understanding Bank Risk through Market Measures
Since the financial crisis, there have been major changes in the regulation of large banks directed at reducing their risk. Measures of regulatory capital have substantially increased; leverage
Securitized Banking and the Run on Repo
The Panic of 2007-2008 was a run on the sale and repurchase market (the “repo” market), which is a very large, short-term market that provides financing for a wide range of securitization activities
Building on Bankruptcy: A Revised Chapter 14 Proposal for the Recapitalization, Reorganization, or Liquidation of Large Financial Institutions
Introduction In 2012, building off of work first published in 2010, the Resolution Project proposed that a new Chapter 14 be added to the Bankruptcy Code, designed exclusively to deal with the
The Role of Derivatives in the Financial Crisis and Their Impact on Security Prices
This study takes on two divergent notions concerning derivatives; that they are dangerous instruments (Warren Buffet) versus the concept that they help to reduce risk (Allen Greenspan). These notions