Slide 1 Factors Causing Financial Crises Asset Markets Effects on Balance Sheets –Stock market decline  Decreases net worth of corporations. –Unanticipated deflation…

Slide 1 Easy Money Policy Capital Inflows Eager Home Buyers Innovative Banks Rating Agencies Ambitious Mortgage Brokers Securitization  MBSs Escalating House Prices Gov’t…

Slide 1 Asia Financial/Currency Crisis: 1997 - 1998 Hot money – capital flight Vicious circles  Debt burdens  Bankruptcies  Depression Asset price collapse Currency…

Slide 1 The Subprime Triggered Crisis : A Perfect Storm Confluence of causes – Past bailouts  Bulletproof system!?!?? – Financial innovations: Finance as end in itself…

Slide 1 The Global Recession The Global Recession. World GDP Growth, 2007-2010. Emerging market countries hoped that they could avoid a similar fate, that there would be…