scholarly journals How Debt Markets Have Malfunctioned in the Crisis

2010 ◽  
Vol 24 (1) ◽  
pp. 3-28 ◽  
Author(s):  
Arvind Krishnamurthy
Keyword(s):  
Financial Crisis ◽  
Counterparty Risk ◽  
Real Economy ◽  
Risk Capital ◽  
Market Prices ◽  
Subprime Mortgage ◽  
The Real ◽  
Market Values ◽  
Debt Markets ◽  
Fundamental Values

The financial crisis that began in 2007 is especially a crisis in debt markets. A full understanding of what happened in the financial crisis requires investigation into the plumbing of debt markets. During a financial crisis, when funds often cannot be raised easily or quickly, the fundamental values for certain assets can become separated for a time from market prices, with consequences that can echo into the real economy. This article will explain in concrete ways how debt markets can malfunction, with deleterious consequences for the real economy. After a quick overview of debt markets, I discuss three areas that are crucial in all debt markets decisions: risk capital and risk aversion; repo financing and haircuts; and counterparty risk. In each of these areas, feedback effects can arise so that less liquidity and a higher cost for finance can reinforce each other in a contagious spiral. I will document the remarkable rise in the premium that investors placed on liquidity during the crisis. Next, I will show how these issues caused debt markets to break down; indeed, fundamental values and market values seemed to diverge across several markets and products that were far removed from the “toxic” subprime mortgage assets at the root of the crisis. Finally, I will discuss briefly four steps that the Federal Reserve took to ease the crisis and how each was geared to a specific systemic fault that arose during the crisis.

Global Financial Crisis and Its Impact on Russia

2009 ◽  
pp. 9-27 ◽  
Author(s):  
A. Kudrin
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Central Bank ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Real Economy ◽  
Energy Prices ◽  
Russian Government ◽  
The Real

The article examines the causes of origin and manifestation of the current global financial crisis and the policies adopted in developed countries in 2007—2008 to deal with it. It considers the effects of the financial crisis on Russia’s economy and monetary policy of the Central Bank in the current conditions as well as the main guidelines for the fiscal policy under different energy prices. The measures for fighting the crisis that the Russian government and the Central Bank use to support the real economy are described.

scholarly journals Interactions between the Real Economy and the Stock Market: A Simple Agent-Based Approach

2012 ◽  
Vol 2012 ◽  
pp. 1-21 ◽  
Author(s):  
Frank Westerhoff
Keyword(s):  
Stock Market ◽  
Economic Activity ◽  
Real Economy ◽  
Agent Based ◽  
The Real ◽  
Goods Market ◽  
Numerical Tools ◽  
Market Approach ◽  
Fundamental Values

We develop a simple behavioral macromodel to study interactions between the real economy and the stock market. The real economy is represented by a Keynesian-type goods market approach while the setup for the stock market includes heterogeneous speculators. Using a mixture of analytical and numerical tools we find, for instance, that speculators may create endogenous boom-bust dynamics in the stock market which, by spilling over into the real economy, can cause lasting fluctuations in economic activity. However, fluctuations in economic activity may, by shaping the firms' fundamental values, also have an impact on the dynamics of the stock market.

scholarly journals BANKRUPTCY THREATS FOR RUSSIAN ORGANIZATIONS AMID THE GLOBAL FINANCIAL CRISIS

2010 ◽  
pp. 60-65
Author(s):  
S. E. Kovan
Keyword(s):  
Financial Crisis ◽  
Economic Crisis ◽  
Global Financial Crisis ◽  
The State ◽  
Important Task ◽  
Real Economy ◽  
The Real ◽  
State Management ◽  
The Global Financial Crisis

The global financial and economic crisis significantly affected enterprises of the real economy sector. According to some estimates, in 2009 about 40% of unprofitable Russian businesses of this economy sector were bankrupt. An important task for the state management is preventing mass bankrupts and non-payments crisis. Some measures to reduce bankrupt risks for enterprises of the real economy sector have been suggested in order to save business and increase its efficiency.

scholarly journals The impact of the financial crisis on the real economy

2010 ◽  
Vol 45 (1) ◽  
pp. 4-20 ◽  
Author(s):  
Daniel Gros ◽  
Cinzia Alcidi
Keyword(s):  
Financial Crisis ◽  
Real Economy ◽  
The Real ◽  
The Impact

Research on Strategies of Introducing Negative Entropy Flows into Enterprises under Economic Crisis

2010 ◽  
Vol 43 ◽  
pp. 756-759 ◽  
Author(s):  
Z.G. Wang
Keyword(s):  
Financial Crisis ◽  
Economic Crisis ◽  
Small Scale ◽  
Specific Method ◽  
Entropy Theory ◽  
Real Economy ◽  
The Real ◽  
Negative Entropy ◽  
Development History ◽  
Profound Influence

Currently, as the global economic crisis further deepens and spreads, financial crisis has extended to the area of the real economy, which has had profound influence on China’s media and small scale enterprises. The paper illustrates the strategy of introducing negative entropy flows into enterprises and its specific method from such aspects as development history, trends and meanings of the research on entropy theory, making a beneficial attempt to overcome economic crisis.

scholarly journals Deciphering the Liquidity and Credit Crunch 2007–2008

2009 ◽  
Vol 23 (1) ◽  
pp. 77-100 ◽  
Author(s):  
Markus K Brunnermeier
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Great Depression ◽  
Financial Market ◽  
Mortgage Market ◽  
Credit Crunch ◽  
Real Economy ◽  
The Real ◽  
The Great Depression

The financial market turmoil in 2007 and 2008 has led to the most severe financial crisis since the Great Depression and threatens to have large repercussions on the real economy. The bursting of the housing bubble forced banks to write down several hundred billion dollars in bad loans caused by mortgage delinquencies. At the same time, the stock market capitalization of the major banks declined by more than twice as much. While the overall mortgage losses are large on an absolute scale, they are still relatively modest compared to the $8 trillion of U.S. stock market wealth lost between October 2007, when the stock market reached an all-time high, and October 2008. This paper attempts to explain the economic mechanisms that caused losses in the mortgage market to amplify into such large dislocations and turmoil in the financial markets, and describes common economic threads that explain the plethora of market declines, liquidity dry-ups, defaults, and bailouts that occurred after the crisis broke in summer 2007.

scholarly journals Domestic and Foreign Transmission of the Global Financial Crisis in the Real Economy. The Polish Situation

2021 ◽  
Vol 13 (1) ◽  
pp. 47-60
Author(s):  
Elena Valentina Tilica ◽  
Keyword(s):  
Financial Crisis ◽  
Food Industry ◽  
Oil And Gas ◽  
Global Financial Crisis ◽  
Real Economy ◽  
Economic Sectors ◽  
The Real ◽  
The Global Financial Crisis ◽  
Contagion Process

This paper studies the contagion process of the 2008 Global Financial Crisis through several important Polish economic sectors: chemical, construction, food, IT, media, oil & gas and telecommunication. The results show a signiÖcant di§erence between the response of these sectors to the crisis. Chemical, construction, media and oil and gas were a§ected, in di§erent degrees, by a domestic Önancial contagion. The food industry was ináuenced in a negligible degree by contagion, while the IT and telecommunication sectors showed a decrease of their co-movements with the Önancial sector, both foreign and domestic.

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