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Causes of the great recession of 2007–2009: The financial crisis was the symptom not the disease!

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  • Jagannathan, Ravi
  • Kapoor, Mudit
  • Schaumburg, Ernst

Abstract

Globalization has increasingly made it possible for labor in developing countries to augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. We argue that this large increase in the developed world’s effective labor supply, triggered by geo-political events and technological innovations, coupled with the inability of existing institutions in the US and developing nations themselves to cope with this shock, set the stage for the great recession. The financial crisis in the US was but the first acute symptom.

Suggested Citation

  • Jagannathan, Ravi & Kapoor, Mudit & Schaumburg, Ernst, 2013. "Causes of the great recession of 2007–2009: The financial crisis was the symptom not the disease!," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 4-29.
    • Handle: RePEc:eee:jfinin:v:22:y:2013:i:1:p:4-29
    DOI: 10.1016/j.jfi.2012.06.002
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    2. Peter Z. Grossman, 2019. "Utilizing Ostrom’s institutional analysis and development framework toward an understanding of crisis-driven policy," Policy Sciences, Springer;Society of Policy Sciences, vol. 52(1), pages 3-20, March.
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    4. Ozili, Peterson & Arun, Thankom, 2020. "Spillover of COVID-19: Impact on the Global Economy," MPRA Paper 99317, University Library of Munich, Germany.
    5. Oleksandr Sylkin & Yuliia Buhel & Natalia Dombrovska & Iryna Martusenko & Myroslava Karaim, 2021. "The Impact of the Crisis on the Socio-Economic System in a Post-Pandemic Society," Postmodern Openings, Editura Lumen, Department of Economics, vol. 12(1), pages 368-379, March.
    6. Alexander, Gordon J. & Baptista, Alexandre M. & Yan, Shu, 2021. "Regulation of bank proprietary trading post 2007–09 crisis: An examination of the Basel framework and Volcker rule," Journal of International Money and Finance, Elsevier, vol. 119(C).
    7. te Kaat, Daniel Marcel & Dinger, Valeriya, 2015. "Global Imbalances and Bank Risk-Taking," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112866, Verein für Socialpolitik / German Economic Association.
    8. Thakor, Anjan V., 2018. "Post-crisis regulatory reform in banking: Address insolvency risk, not illiquidity!," Journal of Financial Stability, Elsevier, vol. 37(C), pages 107-111.
    9. Gangzheng Guo & Yixiao Sun & Shaoping Wang, 2019. "Testing for moderate explosiveness," The Econometrics Journal, Royal Economic Society, vol. 22(1), pages 73-95.
    10. Kathryn Simms, 2014. "Is Universal Financial Education Putting the Cart Before the Horse?," Journal of Economics and Behavioral Studies, AMH International, vol. 6(4), pages 318-332.

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