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Causes of the Financial Crisis: an Assessment Using UK Data

By Christopher Martin and Costas Milas


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, liquidity, monetary policy, global imbalances

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