macroeconomicissuesandvulnerabilitiesintheglobaleconomya.pptVIP

Causes of the housing/credit bubble and bust/crisis Easy monetary policy (the Fed tightened too little too late) Lax supervision and regulation of the financial system Excessive risk taking and leverage of the financial sector given distorted incentives Global current account imbalances and global savings glut Irrational exuberance and animal spirits leading to bubbles Government subsidization of housing (tax benefits, role of Fannie and Freddie, Community Reinvestment Act) Distorted incentives of rating agencies Energy US/global recessions have been associated with oil price spikes (1973-74