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Abstract
A recession began in December of 2007. The general consensus is that the primary cause of the recession was the credit crisis resulting from the bursting of the housing bubble. This paper discusses the four primary causes of the housing bubble—low mortgage interest rates, low short-term interest rates, relaxed standards for mortgage loans, and irrational exuberance. This paper concludes that the combination of these factors caused the housing bubble to be more extreme and the resulting credit crisis to be more severe.
... Overall, the risk of the product to society outweighs its benefits. This was indeed confirmed by the effects of the product on the housing bubble as explained by Byun (2010), Holt (2009), andParkes (2011). Hence, the commercialization of the synthetic CDO was not morally right as supported by the utilitarian principle which suggests that the morally right thing to do in any situation is the one that will produce the greatest utility to everyone affected. ...
... In the case of the new law, all three conditions were in alignment with the type of decisions taken. The effects of the 2008 crisis were still being felt all over in the country and experts agreed that one of the causes of this condition was the repeal of the Glass-Steagall Act of 1933 and the housing bubble that followed (Crawford, 2011;Holt, 2009;Rahman, 2012). In that case, any law that would set the records straight again and suggest means to prevent such things from happening would be accepted by the public opinion and by means of representation, the respective representatives. ...
... The American population and the world watched this unfortunate event unfold in front of them, thinking it would stop, it could not happen, or it would have no immediate impact on their professional activities or their personal wealth. When reality finally struck, companies such as Lehman Brothers and Countrywide Financial either declared bankruptcy or were acquired by other companies (Holt, 2009). Individual investors lost their wealth as stock markets plummeted and those who did not see themselves as investors were hit with reality when they saw the value of their 401(k) drop among other things. ...
In analyzing complex products, this study selected the company Goldman Sachs and one of its product offerings, the synthetic collateralized debt obligation (synthetic CDO). The study later analyzed the ethical implications of providing such a complex product to customers. A review of the literature indicates that researchers identified this product and other associated derivatives of the mortgage backed securities as the main causes of the 2008 financial crisis in the United States of America. As such, Goldman Sachs’ offering of the product posed ethical and moral issues. An analysis of the company and its offering was done under the lenses of various ethical theories such as Kohlberg's theory of moral reasoning, the Kantian ethics, the utilitarian perspective, Friedman’s shareholder theory, the stakeholder theory, the market approach to consumer protection, and the contract view of consumer protection. Besides Friedman’s shareholder theory, all other theories judged the product offering morally wrong and unethical. At the end of the study, the author suggested a contribution to knowledge regarding Kohlberg’s theory of moral reasoning in its application to organizations. The author also suggested further research to validate the outcome of Friedman’s shareholder theory regarding this case.
... In 2008, the U.S. experienced a severe economic recession, the consequences of which are still reverberating throughout the city and the Promise Zone, as well as the rest of the United States. During this time, the U.S. economy suffered a stagnant GDP, unemployment rates nearly doubled, and from the end of 2007 to the beginning of 2009, the Dow Jones Industrial Average plummeted nearly 55% in value (Holt, 2009). ...
... Participants who were familiar with the local and state statutes and enforcement processes described local circumstances that mirror those found throughout the literature, such as properties that are poorly-maintained (Beck, et al., 2012;Hernandez, 2014), legal structures that make code enforcement and owner accountability difficult (Legalzoom.com, 2017), property owners who do not care about tenants or the neighborhoods in which their properties are located (Cooper-McCann, 2016;Desmond, 2015;Fields & Ufer, 2016;Immergluck, 2013), tenants who are difficult to hold accountable for destruction of properties and/or nonpayment of rent (Hiebert, 2002), and barriers to enforcement such as under-resourcing and lack of political will to make code enforcement a priority (Municipal Research and Services Center, 2015). (Fields & Ufer, 2016;Holt, 2009). Economists and business analysts differ in how they define and interpret these cycles and their many causes, but a consistent result of the downturns is the emergence of opportunistic investors seeking to profit from other people's losses (Holt, 2009;Immergluck, 2013). ...
... (Fields & Ufer, 2016;Holt, 2009). Economists and business analysts differ in how they define and interpret these cycles and their many causes, but a consistent result of the downturns is the emergence of opportunistic investors seeking to profit from other people's losses (Holt, 2009;Immergluck, 2013). Severe economic downturns, such as the Great Depression of the 1930s, present speculators the opportunity to purchase large numbers of tax or mortgage-delinquent properties, make minimal repairs, and rent them to low-income families without supporting the necessary ongoing maintenance. ...
... On other development, a declining affordability level in most developed countries is getting serious consideration by policy makers. In the case of developed countries, Bramley (1994) in the UK, Stapledon (2010) and Wood and Ong (2011) for Australia, Wright and Hogue (2012) for Canada, and Bernanke (2009) and Holt (2009) for the US, have highlighted the incident of price bubble to take place, which later on reduced the housing affordability level. According to Trimbath and Montoya (2002), affordability 2 is a public policy measure that has threedimensional space measured by home prices, household income and mortgage interest rates. ...
... Italy 1987-1992 (6) 1993-1998 (6) 7 Spain 1986Spain -1991 1992-1998 (7) Note: Figure in ( ) denotes persistence level in years. Source: Extracted and modified from Agnello and Schuknecht (2009, Although several studies highlighted the recent trend of price reduction such as Klyuev (2008) and Holt (2009), the issue is whether it is a simple cycle of price drop following price increase or it reflects a more severe price fluctuation of boom and burst. The price boom and price burst could be reflecting a significant drop in economic activities and later on translated into significantly low gross domestic product (GDP). ...
... Mortgage interest rates were falling despite the low savings rate in the US due to the influx of saving entering the US from other countries. Most of this saving came from countries with high savings rates such as Japan and the UK and from countries with rapidly growing economies such as China, Brazil, and the major oil exporting countries (Holt, 2009). With regard to house price, foreign investments may contribute to house price increase or if the existing price level is already high, they could contribute to price bubble or boom. ...
Inflows of foreign capital are necessary to complement the available domestic fund or capital of host countries. Foreign capital may also bring in management skills, latest technology and so on, which later has the potential to be transferred to local firms in host countries. It is expected that foreign capital will elevate host country's affordability. Nonetheless, this argument is very much one-way. Foreign capital is also expected to be able to exert negative consequences such as fuelling up domestic price (either stock market price, and/or real estate price) and failure to effectively transferring knowledge, skills and technologies, leading to unchanged or lower country's affordability level. Hence, this study aims at investigating the effect of foreign investment in real estate (FIRE) on host country's affordability. Using 30 emerging markets as a case for the period of 2000–2011, estimated by using fixed-effect model and complemented by 2-stage least square (2SLS) method, this study found that FIRE has a tendency to generate positive effect on countries' affordability. On the policy implication side, government can continue attracting foreign investment in real estate but it should be done cautiously as the effect is not elastic. © Asian Academy of Management and Penerbit Universiti Sains Malaysia, 2016.
... One of the most famous bubbles in history, known as the Dutch Tulip Bubble [29,46], could be traced back to the 1630s. According And the crash itself, is usually referred to as the burst of the US Housing Bubble [58]. ...
... The rapid rise and sudden drop in asset prices form to be a common feature reflected by a bubble cycle. More modern examples can be found in[23,58,129].The burst of an economic bubble sometimes follows with financial crisis, or even economic depression. In modern history, the most devastating crisis would be the 2007-2009 Financial Crisis[104], where people believe the crash of the US real estate market is one of the causes. ...
This thesis consists of three submitted papers and one working paper. It begins with the study of asymptotic solutions for the first passage time densities of various diffusion processes, and the thesis ends up with an application of such findings in the area of systematic trading. In between, financial bubbles and the regulatory risk management for the banking industry are studied additionally. The purpose of this thesis is to, by combining probability theory with financial practice, provide quantitative tools for investment decision and risk management. Chapters 3-5 are reorganised from the first passage time paper [31]. Our research method is mainly based on the potential theory and the perturbation theory. In Chapter 3, a unified recursive framework for finding first passage time asymptotic densities has been proposed. Besides, we prove the convergence of our framework and provide an error estimation formula. Examples related to the Ornstein-Uhlenbeck and the Bessel processes are demonstrated in Chapters 4 and 5, respectively. The second paper [30] is documented in Chapter 6. It introduces a new diffusion process which is relevant to financial bubbles. During the study of the first passage time, we occasionally found that the sample path of the new process coincides with log-price features of bubble assets. In Chapter 6, we show that the new model is a power-exponential transform of the Shiryaev process [116, 117]; and we prove that the model itself, indeed, satisfies various technical requirements for defining a financial bubble [107]. Furthermore, by using our previous framework, we solve the closed-form asymptotic for the model’s first passage time; and according to which, we have made predictions to the burst time of BitCoin. Chapter 7 is a modified version of the third paper [75]. We consider the risk capital allocation issue under the forthcoming regulatory framework, namely the Fundamental Review of Trading Book. Apart from studying coherent properties of the new risk measure, we propose two alternative capital allocation schemes within the range of Internal Modelling Approach. Our analysis shows that, different choices in allocation methods can lead significantly different allocated capitals, therefore, impacting on bank’s performance measure and capital optimisation. Our current working paper about systematic trading is demonstrated in Chapter 8. We propose two mathematical frameworks for, respectively, defining executable trading strategies and identifying the strategy-associated trading signals. Based on our definitions, we show how the first passage time can be employed in systematic trading. As a summary of applications to previous chapters, we use simulation analysis to illustrate the trading idea and the implementation of risk capital allocation. In the end, real data backtest on China stock market indicates that the first passage time could be an effective tool in recognising trading opportunities.
... Mortgage rate is an important factor that determines demand in the real estate market and the Fed funds rate, controlled by the Federal Reserve, is a main benchmark rate in financial markets. Given that a prolonged period of low mortgage rates is often cited as a cause of the real estate bubble and ultimately the global financial crisis [40], it is important to examine whether the relevant monetary authority is capable of managing the mortgage rate or not. ...
... We investigated Fed funds rates and mortgage rates, which were the primary contributors to the real estate bubble prior to the global financial crisis [40]. After the 2001 recession, the Fed kept the Fed funds rates low from 2002 to 2004 to revitalize the economy. ...
This paper studies the contribution of real estate bubble to a financial crisis. First, we document symptoms of a real estate bubble along with a slowdown of the real economy and find indicators of an imminent crash of the stock market, triggering a sense of déjà vu from the 2008 crisis. However, we show that the relationship between real estate and financial markets has changed since the crisis. The empirical analyses provide evidence that the monetary policy has recovered its control over mortgage rates, which had been lost prior to the global financial crisis, and that the real estate market does not have a Granger causality relationship with the stock market any more. Findings suggest that an imminent financial market crash is not likely to be catalyzed by a real estate bubble.
... The rapid increases and sudden drops in asset prices are a common feature reflected by a bubble cycle. More modern examples can be found in [44,25,22]. ...
... The result in above follows from the killed version of potential theory. Note that the strong Markov property and continuity over all stopping times are crucial for representing the unique solution from the Dirichlet problem by(22). ...
We introduce a new diffusion process Xt to describe asset prices within an economic bubble cycle. The main feature of the process, which differs from existing models, is the drift term where a mean-reversion is taken based on an exponential decay of the scaled price. Our study shows the scaling factor on Xt is crucial for modelling economic bubbles as it mitigates the dependence structure between the price and parameters in the model. We prove both the process and its first passage time are well-defined. An efficient calibration scheme, together with the probability density function for the process are given. Moreover, by employing the perturbation technique, we deduce the closed-form density for the downward first passage time, which therefore can be used in estimating the burst time of an economic bubble. The object of this study is to understand the asset price dynamics when a financial bubble is believed to form, and correspondingly provide estimates to the bubble crash time. Calibration examples on the US dot-com bubble and the 2007 Chinese stock market crash verify the effectiveness of the model itself. The example on BitCoin prediction confirms that we can provide meaningful estimate on the downward probability for asset prices.
... Between 2000 and 2003, the Fed drastically reduced interest rates, from 6.5% to 1%. This decreasing trend in rates, together with other factors, triggered an increase in the demand for mortgage loans, fueled in turn by a growing real estate market, characterized by speculative practices and also by a parallel financial market based on the securitization of the same mortgage loans, in which large banks, retail banks and institutional investors held and traded very complex financial instruments such as MBS -Mortgage-Backed Securities or CDO -Collateralized Debt Obligation (Holt, 2009). The crisis started to appear in the second half of 2006 when the US housing bubble began to deflate in the face of a rate hike by the FED, from 1% to 5.25%, which occurred in a rather short period of time, from 2004 to 2006. ...
This work aims to investigate the main problems that impact the pricing models and the sensitivity measures of American options written on shares without a pay-out, in the presence of negative interest rates with a specific focus on the Monte Carlo method. The first paragraph carries out a review of the anomalies caused by such an odd condition and focuses thereafter on the core topic of the research by treating a wide range of numerical models suitable for unbiased evaluation of the early exercise, thus expanding the existing literature. The two following paragraphs are dedicated to describing the models used for the correct estimation of fair value: binomial lattice models (Cox-Ross-Rubinstein - CRR Tree, Leisen Reimer - LR Tree, Jarrow-Rudd - JR Tree and Tian Tree), trinomial stochastic trees, Finite Difference Method (FDM) scheme and the Longstaff-Schwartz Monte Carlo. Particular attention is paid to this last approach which allows to combine the flexibility of traditional numerical integration schemes for stochastic processes on equity with the estimation of the convenience of exercising the American option ahead of time. After conducting quantitative tests both on pricing and on the estimation of sensitivity measures, the LR Tree was selected as the most performing deterministic algorithm to be compared with the Monte Carlo stochastic technique. The final part of the work focuses on quantifying the valuation
gap introduced by negative interest rates in the valuation of American options written on an unprofitable underlying comparing the traditional valuation approach and the deterministic Leisen Reimer model and the Longstaff-Schwartz stochastic model.
... It's about controlling yourself at your own game." Jason Zweig Researchers have times and again criticizedthe efficient market hypothesis and standard finance theories due to their unrealistic assumptions (Basu, 1977;Jensen, 1978;Tversky and Kahneman, 1986;Bernard and Thomas, 1990;Jegadeesh and Titman, 1993;Cooper et al.,2001;Holt, 2009). In the 1980s behavioral finance emerged due to discontent with the unrealistic assumptions of standard finance theories. ...
The purpose of this paper is to check the level of behavioral biases namely, home bias, optimism, and overconfidence of Indian individual investors of India. Another objective of this paper is to examine the relationship between gender and behavioral biases. To check the level of behavioral biases and its relationship with gender, data has been collected with the help of a questionnaire survey conducted on 461 individual investors of the National Capital Region of India. The results of the t-test indicate a significant effect of gender on all three biases. Females are found to be more home biased, less optimistic, and less overconfident than males. Out of three biases, optimism bias is most prevalent followed by home bias, followed by overconfidence bias.
... After June 2020, the housing prices increased at a substantially higher growth rate than earlier observed. This increase led to a positive deviation from the trend, peaking at 13.4 percent, a value not experienced since the housing bubble of 2008 -one of the important causes of the Great Recession (Holt, 2009). As for the stock market, the rapid growth in housing prices after June 2020, may enhance end-point problems in the HP-filter. ...
... After June 2020, the housing prices increased at a substantially higher growth rate than earlier observed. This increase led to a positive deviation from the trend, peaking at 13.4 percent, a value not experienced since the housing bubble of 2008 -one of the important causes of the Great Recession (Holt, 2009). As for the stock market, the rapid growth in housing prices after June 2020, may enhance end-point problems in the HP-filter. ...
... As a matter of fact, in the process leading up to the 2008 Global financial crisis, the Fed's low interest rate policy to mitigate the effects of the 2001 recession and Japan's low interest rate policy to exit the deflationary process since the 1990s have significant implications. A close relationship between expansionary monetary policy and the house price bubble, which played a central role in the formation of the crisis, has been demonstrated by the findings of theoretical and empirical studies (Taylor, 2007;Shiller, 2008;Bernanke, 2009;Holt, 2009). However, the fact that developments in the housing industry have led to a significant contraction in economic activity has raised the importance of house prices in the transmission mechanism. ...
It is possible for central banks to carry out their policies effectively by making the correct assessment of the reflection of their monetary policy decisions on real economic activities. For this reason, it is important to examine the effects of applied policies on real economic activities and inflation. Accordingly, the 2008 global financial crisis revealed the importance of the relationship between monetary policy, house prices, and real economic activity, in other words, the channel of transmission of house prices. As a matter of fact, developments in the housing industry have a significant impact on the process leading up to the 2008 Global financial crisis. In this context, after the 2008 Global financial crisis, both the role of house prices in monetary policy implementation and the function of house prices in the transmission mechanism has begun to be questioned. In this study, the effectiveness of the house prices transmission channel, a subgroup of the asset prices channel based on the experience of the 2008 Global financial crisis, was empirically analyzed based on the Turkish economy. The VAR model has been preferred as a method of empirical analysis. The analysis covers the period 2010-2019, and the monthly data set is used in the analysis. The results of the analysis show that monetary policy affects house prices, but house prices do not have a statistically significant effect on housing investment, industrial production index, and inflation. Related results show that the housing prices transmission channel is not active in the Turkish economy.
... Moreover, the lowinterest environment since the early 2000s (Feunou & Fontaine, 2019) has made investment in housing more appealing for those who have access to capital, potentially increasing inequality. Finally, house price appreciation and the bursting of the U.S. housing bubble in 2007-2008(Holt, 2009) may have cast doubt on the accessibility and reliability of owner-occupied housing as a sound or viable investment for some in both the United States and its northern neighbor, potentially leading people to either consider alternative pathways or avoid the orderly transitions of the housing career altogether. Although most researchers use the housing career framework to explain homeownership patterns, shifting views about housing as a consumption good likely have a more direct relationship to household formation. ...
This study focuses on the fastest changing component of housing demand in the future—the immigrant and minority groups, age 25–84. Using the 2006 and 2016 Canadian censuses and American Community Surveys, we compare headship and homeownership rates of both immigrants and native-born Whites in Canada and the United States. We model the probability of being a renter head, owner head, or nonhousehold head by fitting a multinomial logistic regression, controlling for several individual and contextual variables for both countries. We find that most immigrant groups have had similar patterns of household formation in the two countries and that, whereas immigrants have shown upward mobility in both housing markets, those in Canada have progressed more quickly than in the United States. Further, we find that women are less likely than men to be a household head in both countries, but that the gap is larger in Canada.
... Low-interest rates do not necessarily lead to housing price increases as the recent housing markets in the USA and Spain have shown. However, a link between monetary policy and housing prices has been firmly documented (Sutton, 2002;Tsatsaronis and Zhu, 2004;Holt, 2009). For instance, Oliver Hülsewig and Rottmann (2021) find that real house prices in the EMU rose in response to expansionary monetary policy shocks. ...
Purpose
The purpose of this paper is to quantify to what extent the housing bubble in the early-to-mid 2000s in Spain exacerbated land planning corruption among Spain’s largest municipalities.
Design/methodology/approach
The authors exploit plausibly exogenous variation in housing prices induced by changes in local mortgage market conditions; namely, the rapid expansion of savings banks (Cajas de Ahorros). Accounting for electoral competition in the 2003–2007 and 2007–2009 electoral cycles among Spanish municipalities larger than 25,000 inhabitants, the authors estimate a positive relationship between housing prices and land planning corruption in municipalities with variation in savings bank establishments using instrumental variables techniques.
Findings
A 1% increase in housing prices leads to a 3.9% points increase in the probability of land planning corruption. Moreover, absolute majority governments (not needing other parties’ support) are more susceptible to the incidence of corruption than non-majority ones. Two policy implications to address corruption emerge: enhance electoral competition and increase scrutiny over land planning decisions in sparsely populated.
Originality/value
First empirical evidence of a formal link between the 2000s housing bubble in Spain and land planning corruption.
... This is known as the Dot Com bubble (Ljungqvist and Wilhelm, 2003). The most recent was 2007s Housing Bubble and the Credit Crisis that caused the bankruptcy of many financial institutions like Lehman Brothers (Holt, 2009). This crisis led to an economic recession. ...
Purpose
This paper tries to locate the sectorial bubbles and examines the possibility for investors making extra profit from these bubbles in the Indian stock market.
Design/methodology/approach
The authors use two main indicators: (1) asset centrality and (2) relative value. Asset centrality signals crowded trading, which is associated with the formation of a bubble. Relative value separates the crowded trading during the bubble run-up from the sell-off. The authors observe whether these measures can detect the cycle of bubbles in each sector of the Indian stock market for the period 2004–2019.
Findings
The authors show the sectors going through the inflationary phase delivers much better performance than the index, whereas the sectors in their deflationary phase perform quite worse than the index. This provides attractive opportunities to investors, especially the institutional investors, and fund managers of the Indian market.
Originality/value
To the best of our knowledge, there is no study that looks into the idea of locating a sectoral bubble in the Indian financial stock market using the concept of centrality score and relative score. This work helps to locate a bubble and identify its phases successfully. Traders can enter a bubble in their inflationary period gain profit and exit the trade before the sell-off period begins.
... Other studies hold that excessive credit expansion is also an important intermediary. Holt (2009) argues that low-interest rates and slack credit standards contributed to a more extreme house price bubble and expansion of low-quality mortgage, leading to more severe credit risks. The credit expansion of real estate enterprises also have the same effect, but larger enterprises are less prone to default than smaller enterprises and smaller banks are confronted with higher credit risks than bigger banks (Hancock & Wilcox, 1998;Kashyap & Stein, 2000). ...
This paper examines whether the falling house price causes credit risk or not in China. We note that bidirectional causal relationships exist in several sub-periods using sub-sample rolling window test. Our analysis confirms the option-based model (Foster & Van Order, 1984) that proves the falling house price leads to more defaults of mortgage and increasing credit risk. Meanwhile, the rise in credit risk is likely to be accompanied by the increasing house price. Rising house price has no impact on credit risk. We find banks’ credit expansion may be irrational which leads to the accumulation of credit risk. The tight credit policies and high loan interest rates stimulate the house price to fall. In addition, based on the analysis of the previous periods, we do not think that the credit risk will explode systematically in China with the current situation of mortgage growth slowing down. However, due to the pivotal role of real estate credit in loan structure of banks in China, we still need to be alert to the potential accumulation credit risk caused by the default of individuals and enterprises. It is essential for banks to strengthen the examination of personal credit certificates to prevent speculative loans. Regulators should take into account the impact on bank credit when they formulate policies to control the house price.
... Everyone was hoping to cash-in on the new gold rush. Holt (2009) suggested relaxed mortgage standards were a direct result of government policies intended to improve homeownership rates among low-in-come households. Lenders reduced their underwriting standards to meet the requirements of the Community Reinvestment Act. ...
Great Recession and the Crash of the Housing Market.
... Simultaneously, an 'irrational exuberance' and 'speculation' regarding real estate market led to increase of the bubble as well as a greater number of people taking subprime loans. Though warnings were issued since latter half of 2002, 'prices reached to the peak in 2006' and the bubble burst in 2007, characterized by increase in foreclosure rates, rising number of vacant inventories and 'putting homeowners in negative equity position (Holt, 2009). This phenomenon also resulted in recession period in U.S. economy and took much time to recover the failure and monetary loss. ...
Post 2007, U.S. real estate market witnessed a huge slow down, often termed as ‘Housing Bubble Burst’ which led to financial recession and major losses. The principle factor responsible was ‘irrational’ price speculation of housing stock and increase in subprime mortgage rates. A similar scenario of heightened case can be found in Indian real estate market in resent period where many propositions and arguments have emerged stating the ‘burst of housing bubble’ in Indian cities. While in U.S. government-sponsored enterprises were the major players, in terms of India the real estate market is mostly controlled by private developers. With this context, the paper seeks to understand the nature of ‘housing bubble burst’ in Indian cities especially in Ahmedabad. The paper will proceed using qualitative and quantitative methods to reach to the conclusion.
... A housing bubble, that is, the run-up in housing prices often triggered by low mortgage interest rates, low short-term interest rates, relaxed standards for mortgage loans, and irrational exuberance (Holt (2009)) take longer to deflate in comparison to the stock market bubbles as prices decline slower because the real estate market is less liquid. Reinhart & Rogoff (2009) find that a massive run up in housing prices usually precedes a financial crisis. ...
Financial crisis has an enormous effect on economic growth as it reduces the efficiency of financial system to transfer funds through proper channels and thereby causes economic downturn. The paper examines the factors causing financial crisis for understanding how its build-up looks like before we get into it to take necessary measures in advance to avoid the financial crisis or at least to abate its consequences a country or the world might follow. Major factors that are contributing to financial meltdown are-stock market crash, bank panic, housing bubble, financial liberalization, just name but a few. The paper consults with available literature on major financial crisis episodes of the late twentieth and early twenty-first centuries to identify factors causing such great economic events.
... Ajayi (2007), Bernanke (2009), andHolt (2009), believe that an aggressive and expansionary monetary policy including abundant liquidity and low interest rates was probably the most important macroeconomic driver in the formation of the bubble in the U.S. housing market before 2008. Meanwhile, studies such as Iacoviello and Minetti (2003) and Iacoviello (2005) assert that a contractionary monetary policy could lead to a decrease in housing prices in European countries and the U.S. ...
... In particular, after the 2008-2009 U.S. subprime crisis, the Federal Reserve has been under attack for its loose monetary policy during the years preceding the crisis. Some research, such as Taylor (2007), Bernanke (2009), andHolt (2009), believe that an aggressive and expansionary monetary policy including abundant liquidity and low interest rates was probably the most important macroeconomic driver in the formation of the bubble in the U.S. housing market before 2008. ...
... In 2008, this index reported its largest drop in history. That was the start of the following credit crisis, which is considered to be the primary cause of the recession in the United States and henceforth of the global financial crisis (Holt, 2009). ...
... The level of visitation to the IMPN is not only affected by the biotic resources or the available seats, but by economic, health, and social events worldwide. For instance, over 90% of the foreign tourism is from the United States, and during 2008 the U.S. economy was negatively impacted by the housing market financial crisis (Holt, 2009); the next year an outbreak of influenza virus in Mexico (Echevarría-Zuno et al., 2010) caused a decrease in the influx of tourists to the region, thereby diminishing environmental pressure on the area. From 2011 onwards an increase in tourism was observed, and this was partially driven by a rise in domestic tourism. ...
Carrying capacity has emerged as an important parameter to consider when developing a series of effective management tools for natural protected areas such that the experience of the average tourist remains satisfactory when exerting an "acceptable" or minimum impact to the protected area. The carrying capacity is site-specific, as it considers not only human activities and management capacity, but also the environmental characteristics (both biotic and abiotic) of the area of interest. Islas Marietas National Park is a protected area with an already-established management plan that seeks to conserve and protect the coral-rich areas and all associated organisms within the park. However, there are currently no guidelines regarding the maximum carrying capacity and the limit of acceptable change. At Islas Marietas two activities, SCUBA diving and snorkeling were evaluated, and the physical carrying capacities were 417–583 dives site−1 day−1 and 720–840 snorkeling excursions per day−1, respectively; however, when using correction factors, the effective carrying capacity was reduced to 22.4–46.4 dives day−1 and 83–135 snorkeling excursions day−1. Using the annual historical tourism data, the carrying capacity of the area has not yet been reached; however, the local marine resources undergo different degrees of pressure according to the high tourism seasons, suggesting that, even if the carrying capacity has not been met, the marine environment could still be compromised at specific times. The implementation of the local carrying capacity had lead not only to maintain the balanced use of resources at Islas Marietas National Park but furthermore, combined with a other programs, to promote projects such as coral cover restoration, enhancing the relevance of the application of carrying capacity for the sustainable use at any coralline area.
... The level of visitation to the IMPN is not only affected by the biotic resources or the available seats, but by economic, health, and social events worldwide. For instance, over 90% of the foreign tourism is from the United States, and during 2008 the U.S. economy was negatively impacted by the housing market financial crisis (Holt, 2009); the next year an outbreak of influenza virus in Mexico (Echevarría-Zuno et al., 2010) caused a decrease in the influx of tourists to the region, thereby diminishing environmental pressure on the area. From 2011 onwards an increase in tourism was observed, and this was partially driven by a rise in domestic tourism. ...
The functional role of coral-associated bacteria and their contribution to coral health is still largely unknown. The first necessary step to address this gap in the knowledge is based on characterization of the microbial assemblage of the coral and the species-specific, temporal and spatial variation in its diversity. Branched corals (e.g., genus Pocillopora), are the main builders of coral reefs worldwide. This study evaluated the bacteria associated with the mucus and tissues of Pocillopora damicornis and Pocillopora verrucosa, as well as that of the seawater and surrounding sediments, in 6 sites of the Mexican Central Pacific during summer and winter seasons. The molecular techniques DGGE and RFLP were used with the 16S rDNA to assess the most abundant bacterial OTUs. The relationships between the bacterial-coral assemblage and environmental and spatial variables of the reef surroundings were also evaluated, using the multivariate analyses. Twenty different Operational Taxonomic Units (OTU) were obtained, with the highest number presented by the sediments. Specificity of bacterial groups was found for each coral species, as well as between the tissue and mucus of each species. The results showed that the bacterial dominant groups were similar between seasons, but these showed significant spatial variations among substrates within sites, as well as per substrate across all sites. The environmental variables that explained the variation of the dominant bacterial groups in corals and sea water were the coverages of fleshy macroalgae, live coral and sponge. In contrast, variation in the sediments was explained by the coverages of sand, rubble and rock.
... Istilah housing bubble price dikutip dariHolt 2009 Salah satu prinsip Islam adalah universalisme (syumuliyah) yang berarti tidak terbatas pada muslim, namun meliputi masyarakat non-muslim. ...
This research aimed to know awareness of teachers (lecturers) specifically on subject of Financial Accounting including recognition, measurement, and reporting of “interest”. Muslims believe that interest is forbidden as riba. Indeed, the practice of interest is not limited as Islamic issue, but it is viewed as universal issue based on housing bubble price cycle that may affect all sectors. By employing post-phenomenology as well as thought of Don Ihde, this research involving five diversified informant. The results showed that the subjects of Financial Accounting lecturer (Muslim) still stuck on "technology" (term of Ihde) in the form of international curriculum standards, reference books, and subject (course) planning.
... All migrations were originated in the US housing bubble that gave start to the subprime financial crisis. Several studies have highlighted the role of extremely low mortgage interest rates, low short-term interest rates, relaxed standards for mortgage loans, and irrational exuberance, in the formation of the US housing bubble (see, for instance, Holt 2009). ...
We study the existence and international transmission of housing market bubbles, using quarterly information of twenty OECD countries for the period comprised between 1970 and 2015. We find that housing bubbles are present in all the countries included in our sample. Multiple bubbles are found in all but two of those countries. We find five episodes of transmission. All of them had origin in the US housing bubble preceding the subprime crisis. Most transmissions were to European countries. Notably, the Spanish housing bubble was not a direct consequence of the US housing bubble. Its origin must be found in other causes.
... There are many potential determinants of housing prices and causality between interest rates and housing prices cannot be established from observational inference. Low interest rates do not necessarily lead to housing price increases as the recent housing markets in the US, Greece, and Spain have shown but a link between monetary policy and housing prices has been firmly documented (Sutton, 2002;Tsatsaronis and Zhu, 2004;Holt, 2009). Several studies have identified a positive relationship between housing prices and the availability of credit (mortgage lending) in Greece (Himoniti-Terroviti, 2005;Brissimis and Vlassopoulos, 2009) and Spain (Gimeno y Martínez-Carrascal, 2006;Gentier, 2012). ...
The adoption of the euro in 2002 led to an unprecedented supply of cheap mortgage credit in Greece and Spain. The housing bubbles that ensued amplified developers' incentives to offer bribes for illegal construction projects. We exploit the mortgage credit windfall as the shock that induced variation in housing prices to examine the effects of the latter on zoning corruption. The empirical analysis relies on objective measures of zoning corruption at the regional level from 2003 through 2008 for Greece and from 2006 through 2008 for Spain. We employ legal indictments of zoning officials from prosecution records for Greece, which are novel to the literature, and media reports of zoning corruption scandals for Spain. Adjusting for unemployment, population, population density and college attainment, our baseline negative binomial regression estimates indicate a positive and significant relationship between housing prices and zoning corruption. Our findings are robust to a series of checks that include zero-inflated variants of the negative binomial model, and linear models that address model misspecification, omitted variables and dynamic panel bias. In the case of Spain, we are also able to analyze the sensitivity of our findings using a provincial panel that provides substantially more cross-sectional variation.
... Although there is little consensus on what caused the U.S. housing bubble (Levitin and Wachter, 2011), which burst first in the United States and then spread to other countries, there are several factors that are widely reported in journalistic and academic sources that are considered more or less important in the overall scheme. The degree in which these factors caused, influenced or exacerbated the financial crisis varies between authors (Acharya and Richardson, 2009;Ferguson, 2009;Holt, 2009;Levitin and Wachter, 2011;Mauboussin, 2007;Rahn, 2012;Roubini and Mihm, 2010). ...
... All migrations were originated in the US housing bubble that gave start to the subprime financial crisis. Many authors have proposed that the main cause of the US housing bubble were the persistence of extremely low mortgage interest rates, low short-term interest rates, relaxed standards for mortgage loans, and irrational exuberance (see, for instance, Holt, 2009). ...
Türkiye’nin 26 alt bölgesinin ilk ve ikinci el konut talebi yakınsama hipotezi ile incelenmiştir. Çalışmada, 2013 Ocak-2023 Mart dönemine ait aylık zaman serileri kullanılmıştır. Bölgeler arası konut talebi yakınsama hipotezi koşullu ve koşulsuz tahmin edilmiştir. Analizlerde dinamik panel sistem GMM yaklaşımından yararlanılmıştır. İlk el konut talebine ait koşulsuz yakınsama modeli analizi sonucunda; ilk el konut satışına ait gecikmeli değerlerin konut talebini pozitif etkilediği belirlenmiştir. Koşulsuz yakınsama modelinde ise konut fiyatı ile hane geliri değişkeni ilk el konut talebini pozitif etkilerken ikinci el konut satış miktarı ise ilk el konut talebini negatif etkilemektedir. İkinci el konut satışına ait yakınsama hipotezi bulgularına göre ise koşulsuz modelde; ikinci el konut satışının gecikmeli değerleri ikinci el konut talebini pozitif etkilemektedir. Koşullu modellerde yer alan hane geliri değişkeni ikinci el konut talebini pozitif ilk el konut satışı değişkenini ise negatif etkilemektedir. İkinci el konut satışı yakınsama modelindeki konut fiyatı değişkeni ise istatistiki olarak anlamsızdır.
COVID-19 brought about a shift in entrepreneurial opportunities and in the United States. In this paper, we proxy entrepreneurial processes by examining housing prices in different regions of the United States. Housing prices capture the movement in people, tax dynamics, and behavioral preferences for equity ownership in different regions and over time, all of which were drastically impacted by COVID-19. We examine all U.S. equity crowdfunding offerings starting with the very first offerings in 2016 Q2 until 2021 Q1 based on data from the Securities and Exchange Commission. The data indicate that regional housing prices post-COVID-19 are a strong predictor of the number of equity crowdfunding campaigns and the amount of capital raised. The impact of housing price changes on crowdfunding is more pronounced among more prosperous regions. The housing price effect is robust to numerous controls and consideration of outliers.
The developments in the US housing and real estate sectors played an important role during the Global Financial Crisis of 2008. The findings of previous theoretical and empirical studies have revealed that there was a strong relationship between the expansionary monetary policy that included high liquidity and low-interest rates in the US economy and the housing price bubble, which played a central role in the development of the crisis. These developments have revealed the importance of the relationship between monetary policies and asset prices. In this direction, the present study aims to conduct an empirical investigation of the relationship between monetary policies and asset prices in the Turkish economy. In line with this purpose, the SVAR approach was used in the study. The period included within the scope of the present study was determined as 2011:5-2018:5. According to the findings obtained, it is observed that the only significant reactions of monetary policies to the variables included within the model were to the real effective exchange rate and treasury bill rate. Additionally, the effects of monetary policies on the real effective exchange rate, housing price index, BIST 100 index, treasury bill rate, and interest of government securities were found to be significant.
Housing credit in Indonesia has high growth from 2011. This growth could become excessive growth and cause housing bubble. Therefore, the government implement Loan To Value (LTV) to control mortgages. However, growth of housing credit is still fluctuating and slowing down when the government loosening LTV policy. This condition become the reasons to evaluate the success of LTV in Indonesia. The results using Hodrick Prescott (HP) filter method identified that housing credit several times experienced excessive growth and with Generalized Linear Autoregressive Moving Average (GLARMA) method shows that housing credit to GDP ratio is influenced by previous month and not influenced by LTV policy. Based on these results, Bank Indonesia can combine LTV policy with Debt To Income policy and determine the target of mortgage growth target to succesful housing credit control.Keywords— KPR, LTV; excessive growth; HP filter, GLARMA
Amorello explores interactions and conflicts between macroprudential and monetary policies, providing an impact assessment of the current calibrations of powers and competences, as well as evidences of the economic interactions between financial and monetary stability. The risk of conflicting policy stances between macroprudential supervision and monetary intervention under particular scenarios is also recognized, paying attention to the risk of negative spillovers that may potentially arise in the EU financial environment. Amorello also scrutinizes the institutional models that may permit the alignment of the two policies, noting how the EU legal and institutional settings may offer a fruitful stimulus for reflection upon the critical issues at stake.
Chiaramonte investigates banking liquidity problems during the subprime crisis of 2007–2009. The chapter focuses on the main characteristics of the banks most affected by these issues, the type of liquidity problems they faced, and how the liquidity crisis affected solvency in many financial institutions, undermining their stability. Due to the key role of liquidity shortages in determining distress in the banking sector, the chapter ends with an overview of the main studies that investigated the policies designed to prevent and manage liquidity crises.
This paper examines the behaviour of vendors and purchasers indirectly through the judicial decisions in Malaysia, Australia, and the United States. The decided cases illustrate that buyers are still indolent in their duty to conduct pre-purchase inspections, some vendors were seen to have actively concealed defects in the property and fraudulently misrepresented the conditions of the properties. This paper suggests consumer education for both the vendors and purchasers and the extension of the jurisdiction of either the Tribunal for Homebuyers Claims or the Tribunal for Consumer Claims to include matters regarding the dispute as to the condition of the property.
The aim of this research paper is to attempt to understand the 'Trilema' which has confounded the economists on how to handle the three parameters like output, interest rates and currency effectively, to achieve the optimum level for a given economy, and even to drive an economy from recession to recovery. The authors used the US economic recession (2007-2009) event as a starting point and looked at policy interventions, both fiscal and monetary. They envisaged as to how the three chosen parameters played out over time, and what economic models can explain the basis of both the policy intervention and recovery. Our exploratory work is to understand the economic policy parameters that are critical to manage; yet which has been complicated by the US's most open economy, to which the basic ISLM models could not support. The team finally found that the Mundell-Fleming model does make sense for open economy like US. The researchers analysed the data from US economy to see if the model is able to justify the data coming out from US from 2006-2016, when many policy interventions were taking place. The team focussed on the causes of this recession; because it was important to understand the variables underneath which caused the crisis in the first place. Another factor explored was the causes of the crisis, which to illustrate how money market was stretched by excess credit creation and excessive risk taking by the commercial banks in the post repeal of Glass-Steagall's Act in 1999. It also led to the phenomenal growth in the derivatives market and rapid integration of global capital markets across the world. This research paper also goes back to the fundamental question, as to if the monetary policy is more effective or fiscal policy is more effective? Or both need to be played in recovery. Was there even a role of fiscal policy and in what form was it deployed in US economic recovery? Finally the authors confirm that forex market equilibrium co-exist together with goods and money market equilibrium for open economies as that of US. It believed that currency markets are very important and important policy decisions should look at the long term impact on the currency stability; in the lens of competiveness of economy in the global market place.
The investor's expectation of future price increases on real estate is causing to further rise of prices. In the 1990s, Turkey’s real estate price / rental income ratio was around 10, now is between 17-20 years. On the other hand, as a result of insufficient innovation and incentive application of industry, some companies have left their core activity and moved to the consruction industry. Studies using time series analysis with Turkey’s data show that GDP growth and interest rates have a great impact on investment decisions of consruction companies. Using Turkstat, Bloomberg and Eurostat data, the empirical part of this study present the relationship between interest rate and GDP growth and consruction investments. The analysis will continue with cross-city-time-series analysis for a sample of 4 well-developed cities of turkey, in terms of construction investments. Finally, measuring the price-to-earnings ratio, the home price-to-rent ratio, the gross rental yield and the house ownership ratio will be compared to those of the metropolitan cities in Europe, whether there is a real estate bubble in Turkey or not.
In Chap. 1, we describe the evolution of the field and the complex, multi-sector nature of community development work. The chapter reviews the changing economic and social factors which have stressed the condition of America’s communities and altered the support system for the sector which has resulted in the need for a different approach—one that works across sectors and is built collaboration with organizations with complementary competencies. The chapter also lays out the goals for the book, presents key questions for the field, and highlights the content of each of the following chapters.
An in-depth look into the housing bubble and financial meltdown of the U.S. economy during the years from 2007-2009. This paper deep dives into the historical issues beneath the surface that helped exacerbate the market conditions during the late 2000s.
This chapter provides an overview of the economic downturn and the process thinking pathways investors most likely used to make bad decisions. Several key factors are introduced, which undoubtedly greatly influenced real estate market investments during this time.
There are often multiple surveys available that estimate and report related demographic variables of interest that are referenced over space and/or time. Not all surveys produce the same information, and thus, combining these surveys typically leads to higher quality estimates. That is, not every survey has the same level of precision nor do they always provide estimates of the same variables. In addition, various surveys often produce estimates with incomplete spatio-temporal coverage. By combining surveys using a Bayesian approach, we can account for different margins of error and leverage dependencies to produce estimates of every variable considered at every spatial location and every time point. Specifically, our strategy is to use a hierarchical modelling approach, where the first stage of the model incorporates the margin of error associated with each survey. Then, in a lower stage of the hierarchical model, the multivariate spatio-temporal mixed effects model is used to incorporate multivariate spatio-temporal dependencies of the processes of interest. We adopt a fully Bayesian approach for combining surveys; that is, given all of the available surveys, the conditional distributions of the latent processes of interest are used for statistical inference. To demonstrate our proposed methodology, we jointly analyze period estimates from the US Census Bureau's American Community Survey, and estimates obtained from the Bureau of Labor Statistics Local Area Unemployment Statistics program. Copyright
Drawing on qualitative interviews and participatory urban-appraisal tools, this paper analyzes household perceptions on the five elements of Lawrence and Su-Yeul's market-led pluralism (M-LP) framework (2008). It uses post-Fordist Columbus, Ohio, and Fordist Milwaukee, Wisconsin, as testing grounds for these household perspectives. M-LP suggests that at the center of contemporary housing market lie five elements: developers/builders who unveil new urban spaces with culturally open communities; lending agencies that offer affordable mortgages to all; real estate brokers/agents who have moved past discriminatory practices; consumers whose preferences emphasize class-type elements; and communities that impose development agendas. While many felt that the housing market of the mid-2000s was racially blind, race still played a crucial role in driving home-buying decisions, especially in Milwaukee. Columbus respondents aligned more closely with M-LP, putting greater emphasis on class, but they also used phrases and words to blur race and class distinction. Both metropolises, though, illustrated complex intertwining between class and culture.
Why did the mortgage market melt-down so badly? Why were there so many defaults when the economy was not particularly weak? Why were the securities based upon these mortgages not considered anywhere as risky as they actually turned out to be? It is the thesis of this paper that, in an attempt to increase homeownership, particularly by minorities and the less affluent, an attack on underwriting standards was undertaken by virtually every branch of the government since the early 1990s. The decline in mortgage underwriting standards was universally praised as an 'innovation' in mortgage lending by regulators, academic specialists, GSEs, and housing activists. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The bubble increased the number of housing speculators with estimates indicating that one quarter of all home sales were speculative sales prior to the bubble bursting. The recent rise in foreclosures is not related to the subprime/prime distinction since both markets had similar size increases in foreclosures that occurred at exactly the same time. Instead, the adjustable-rate/fixed-rate distinction is the key to understanding the rise in foreclosures. This is consistent with speculators turning and running when housing prices stopped rising. It is not consistent with the nasty-subprime-lender hypothesis currently considered to be the cause of the mortgage meltdown.
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“If you wonder how it could be possible for a subprime mortgage loan to bring the global financial system and the U.S. economy to its knees, you should read this book. No one is better qualified to provide this insight and advice than Mark Zandi.” ï¾Larry Kudlow, Host, CNBC's Kudlow & Company “Every once in a while a book comes along that's so important, it commands recognition. This is one of them. Zandi provides a brilliant blow-by-blow account of how greed, stupidity, and recklessness brought the first major economic crises of the 21st century and the most serious since the Great Depression.” -Bernard Baumohl, Managing Director, The Economic Outlook Group and best-selling author, The Secrets of Economic Indicators “Throughout the financial crisis Mark Zandi has played two important roles. He has insightfully analyzed its causes and thoughtfully recommended steps to alleviate it. This book continues those tasks and adds a third-providing a comprehensive and comprehensible explanation of the issues that is accessible to the general public and extremely useful to those who specialize in the area.” ï¾Barney Frank, Chairman, House Financial Services Committee The subprime crisis created a gigantic financial catastrophe. What happened? How did it happen? How can we prevent similar crises from happening again? Mark Zandi answers all these critical questions-systematically, carefully, and in plain English. Zandi begins with a fast-paced overview and then illuminates the deepest causes, from the psychology of homeownership to Alan Greenspan's missteps. You'll see the home “flippers” at work and the real estate agents who cheered them on. You'll learn how Internet technology and access to global capital transformed the mortgage industry, helping irresponsible lenders drive out good ones. Zandi demystifies the complex financial engineering that enabled lenders to hide deepening risks, shows how global investors eagerly bought in, and explains how flummoxed regulators failed to prevent disaster, despite crucial warning signs. Most important, Zandi offers indispensable advice for investors who must recognize emerging bubbles, policymakers who must improve oversight, and citizens who must survive whatever comes next. Liar's loans, flippers, predatory lenders, delusional homebuilders How the housing market came unhinged, and the whirlwind came together Alan Greenspan's trillion-dollar bet Betting on the boom, ignoring the bubble The subprime market goes global Worldwide investors get a piece of the action-and reap the results Wall Street's alchemists: conjuring up Frankenstein New financial instruments and their hidden contents Back to the future: risk management for the 21st century Respecting the “animal spirits” that drive even the most sophisticated markets
The 'shadow banking system' at the heart of the current credit crisis is, in fact, a real banking system – and is vulnerable to a banking panic. Indeed, the events starting in August 2007 are a banking panic. A banking panic is a systemic event because the banking system cannot honor its obligations and is insolvent. Unlike the historical banking panics of the 19th and early 20th centuries, the current banking panic is a wholesale panic, not a retail panic. In the earlier episodes, depositors ran to their banks and demanded cash in exchange for their checking accounts. Unable to meet those demands, the banking system became insolvent. The current panic involved financial firms 'running' on other financial firms by not renewing sale and repurchase agreements (repo) or increasing the repo margin ('haircut'), forcing massive deleveraging, and resulting in the banking system being insolvent. The earlier episodes have many features in common with the current crisis, and examination of history can help understand the current situation and guide thoughts about reform of bank regulation. New regulation can facilitate the functioning of the shadow banking system, making it less vulnerable to panic.
A central question surrounding the current subprime crisis is whether the securitization process reduced the incentives of financial intermediaries to carefully screen borrowers. We examine this issue empirically using data on securitized subprime mortgage loan contracts in the United States. We exploit a specific rule of thumb in the lending market to generate exogenous variation in the ease of securitization and compare the composition and performance of lenders' portfolios around the ad hoc threshold. Conditional on being securitized, the portfolio with greater ease of securitization defaults by around 10%-25% more than a similar risk profile group with a lesser ease of securitization. We conduct additional analyses to rule out differential selection by market participants around the threshold and lenders employing an optimal screening cutoff unrelated to securitization as alternative explanations. The results are confined to loans where intermediaries' screening effort may be relevant and soft information about borrowers determines their creditworthiness. Our findings suggest that existing securitization practices did adversely affect the screening incentives of subprime lenders. (c) 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..
We conduct a within-county analysis using detailed ZIP code—level data to document new findings regarding the origins of the
biggest financial crisis since the Great Depression. The sharp increase in mortgage defaults in 2007 is significantly amplified
in subprime ZIP codes, or ZIP codes with a disproportionately large share of subprime borrowers as of 1996. Prior to the default
crisis, these subprime ZIP codes experience an unprecedented relative growth in mortgage credit. The expansion in mortgage
credit from 2002 to 2005 to subprime ZIP codes occurs despite sharply declining relative (and in some cases absolute) income
growth in these neighborhoods. In fact, 2002 to 2005 is the only period in the past eighteen years in which income and mortgage
credit growth are negatively correlated. We show that the expansion in mortgage credit to subprime ZIP codes and its dissociation
from income growth is closely correlated with the increase in securitization of subprime mortgages.
A central question surrounding the current subprime crisis is whether the securitization process reduced the incentives of
financial intermediaries to carefully screen borrowers. We examine this issue empirically using data on securitized subprime
mortgage loan contracts in the United States. We exploit a specific rule of thumb in the lending market to generate exogenous variation in the ease of securitization and compare the composition and performance
of lenders' portfolios around the ad hoc threshold. Conditional on being securitized, the portfolio with greater ease of securitization defaults by around 10%–25%
more than a similar risk profile group with a lesser ease of securitization. We conduct additional analyses to rule out differential
selection by market participants around the threshold and lenders employing an optimal screening cutoff unrelated to securitization
as alternative explanations. The results are confined to loans where intermediaries' screening effort may be relevant and
soft information about borrowers determines their creditworthiness. Our findings suggest that existing securitization practices
did adversely affect the screening incentives of subprime lenders.
El autor estudia y explica la dinámica y causas de distintas crisis económicas recientes (México, Asia, Rusia, Brasil), que ocurrieron a pesar de que se supone existen teorías y estrategias para controlar y prevenir tales crisis. Se sugiere revisar y utilizar las viejas teorías, más que inventar otras nuevas, para poder enfrentar estos nuevos problemas. En esta edición actualizada aborda los problemas financieros que ha vuelto a enfrentar la economía estadounidense a mediados de la década del 2000 y la crisis económica mundial de finales del 2008 e inicios del 2009, y propone maneras de actuar ante ella.
The Crash of 2008: Cause and aftermath
- J Gwartney
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T h e M o r t g a g e Market: What Happened? " Npr.org
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Trehan, V. 2 0 0 7. " T h e M o r t g a g e
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http://www.npr.org/templates/story/story
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Watch out for bad-loan signals
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MacDonald, J. 2004. " Watch out for
bad-loan signals. " Bankrate.com.
http://www.bankrate.com/brm/news/mor
tgages/20040615a1.asp.