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An Analysis of the 2008 Subprime Mortgage Crisis: Causes, Effects and Policy Response

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  • Naape, Baneng

Abstract

This essay scrutinized the effects of Quantitative Easing (QE) on selected macroeconomic and financial variables. By means of a desktop approach, we find that QE1 had a strong and beneficial impact on the real economy through credit easing whereas QE2 and QE3 had small positive or neutral effects on banks and life Insurers. Although QE did not close the gap left by the 2008 global financial crisis, it helped reduce the rate at which the crisis was rising and proved to be an effective crisis management tool. QE boosts the economy in the short run but weakens the economy in the long run.

Suggested Citation

  • Naape, Baneng, 2020. "An Analysis of the 2008 Subprime Mortgage Crisis: Causes, Effects and Policy Response," MPRA Paper 100019, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:100019
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    File URL: https://mpra.ub.uni-muenchen.de/100019/1/MPRA_paper_100019.pdf
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    References listed on IDEAS

    as
    1. Bhattarai, Saroj & Chatterjee, Arpita & Park, Woong Yong, 2021. "Effects of US quantitative easing on emerging market economies," Journal of Economic Dynamics and Control, Elsevier, vol. 122(C).
    2. Robert Lavigne & Subrata Sarker & Garima Vasishtha, 2014. "Spillover Effects of Quantitative Easing on Emerging-Market Economies," Bank of Canada Review, Bank of Canada, vol. 2014(Autumn), pages 23-33.
    3. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 215-287.
    4. Gabriel Chodorow-Reich, 2014. "Effects of Unconventional Monetary Policy on Financial Institutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(1 (Spring), pages 155-227.
    5. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 215-287.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    global financial crisis; quantitative easing; central banks; zero lower bound;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G1 - Financial Economics - - General Financial Markets

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