Article thumbnail
Location of Repository

Causes of the Financial Crisis: an Assessment Using UK Data

By Christopher Martin and Costas Milas

Abstract

We present empirical evidence that the marked rise in liquidity in 2001-2007 was due to large and persistent current account deficits and loose monetary policy. If this increase in liquidity was a pre-condition for the financial crisis that began in July 2007, we can conclude that loose monetary and the deterioration in current account balances were causes of the financial crisis.financial crisis, liquidity, monetary policy, global imbalances

OAI identifier:

Suggested articles

Citations

  1. (2008). An equilibrium model of global imbalances and low interest rates.
  2. (1985). Continuous auctions and insider trading,
  3. (2009). Deciphering the Liquidity and Credit Crunch 2007-08.
  4. (2005). Divisia Money. Bank of England Quarterly Bulletin, Spring
  5. (2009). Does high M4 money growth trigger large increases in UK inflation? Evidence from a regime-switching model.
  6. (2007). Financial Stability Report.
  7. (2003). Liquidity risk and expected stock returns.
  8. (2009). Liquidity shocks and asset price boom/bust cycles. Working paper No.
  9. (2004). Macroeconmic sources of systematic liquidity. Unpublished working paper,
  10. (2001). Market Liquidity and Trading Activity.
  11. (1996). Market Microstructure and Asset Pricing: On the Compensation for Illiquidity in Stock Returns.
  12. (2008). Monetary Policy and the State of the Economy. Testimony to the US House of Representatives.
  13. (2005). Money and Asset Prices in Boom and Bust. Institute for Economic Affairs,
  14. (2005). Money and macroeconomic performance: revisiting divisia money.
  15. (2008). Money, liquidity, and financial cycles.
  16. (2009). Money, liquidity, and monetary policy. Federal Reserve Bank of New York
  17. (2002). Pervasive liquidity risk. Unpublished Paper, Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=996069
  18. (1997). Postwar U.S. business cycles: An empirical investigation.
  19. (2008). Some Lessons for Monetary Policy from the Recent Financial Turmoil. Remarks given at a conference on Globalisation, Inflation and Monetary Policy in
  20. (1994). Testing the constancy of regression parameters against continuous structural change.
  21. (2001). The demand for M3 in the Euro Area.
  22. (2008). The financial crisis and the policy responses: an empirical analysis of what went wrong. NBER Working Paper No.
  23. (2008). The Subprime Turmoil: What’s Old, What’s New, and What’s Next”, Jackson Hole, Conference Paper, Federal Reserve Bank of Kansas City. Available from: http://www4.gsb.columbia.edu/cbs-directory/detail/494785/Charles+Calomiris Chan,
  24. (2008). Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash, Public Affairs Books.

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.