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Causes of the Financial Crisis: an Assessment Using UK Data

Author

Listed:
  • Christopher Martin

    (University of Bath (UK))

  • Costas Milas

    (Keele University (UK); Rimini Centre for Economic Analysis, Rimini, Italy)

Abstract

We present empirical evidence that the marked rise in liquidity in 2001-2007 was due to large and persistent current account deficits and loose monetary policy. If this increase in liquidity was a pre-condition for the financial crisis that began in July 2007, we can conclude that loose monetary and the deterioration in current account balances were causes of the financial crisis.

Suggested Citation

  • Christopher Martin & Costas Milas, 2009. "Causes of the Financial Crisis: an Assessment Using UK Data," Working Paper series 10_09, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:10_09
    as

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    References listed on IDEAS

    as
    1. Costas Milas, 2009. "Does high M4 money growth trigger large increases in UK inflation? Evidence from a regime-switching model," Oxford Economic Papers, Oxford University Press, vol. 61(1), pages 168-182, January.
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    More about this item

    Keywords

    financial crisis; liquidity; monetary policy; global imbalances;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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