Institute: Essay Example

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Annotated Bibliography


What was the single most important reason why the bursting of the US housing bubble in 2008 turned into a global financial crisis?

Brunnermeier, M. K. (2009). Deciphering the Liquidity and Credit Crunch 2007-2008. The Journal of Economic Perspectives, 23(1), 77-100.

Brunnermeier (2009) paper endeavours to elucidate the fiscal mechanisms that lead to failure by mortgage market to amplify into an enormous turmoil and dislocations in the financial markets, and explains common threads of economy that describe the plethora of bailouts, defaults, liquidity dry-ups, and market declines that took place subsequent to the global financial crisis. According to Brunnermeier, the 2008 financial market mayhem brought about the most grievous financial crisis ever since the 1929 Great Depression and resulted to enormous consequences on the real financial system. Brunnermeier’s study results prove that the bursting of the housing bubble compelled financial institutions to record some hundred billion dollars in bad loans thanks to mortgage delinquencies. Brunnermeier as well established that whereas the overall losses of mortgage are enormous, they are still moderately diminutive than the U.S. stock market wealth lost ($8 trillion) that took place between October 2007 and October 2008.

Valadez, R. M. (2011). The housing bubble and the GDP: a correlation perspective. journal of Case Research in Business and Economics, 3, 1-18.

Valadez (2011) study investigates a connection between the houses prices as well as the United States gross domestic product (GDP) prior to, during, and subsequent to the period acknowledged as the 2007 global financial meltdown. What’s more, Valadez study spreads out into the international setting through its literature review. Tracking the U.S. GDP numbers as well as the housing price index over the previous five years, Valadez retrieved data from various sources, but adjusted in equal periods, analysed, subjected to Regression Analysis, as well as tested for significance. Valadez study results point out that there is connection between the two variables in a way that a quarterly adjustment in the housing price index could result into a quarterly adjustment in Real GDP. Scores of forces as well as factors generated the ideal tempest for the global financial crisis, but from Valadez study it seems that the Subprime mortgage crisis, whose centre was the housing market’s price bubble, was the glimmer that instigated it all.

Bondt, W. D. (2010). The crisis of 2008 and financial reform. Qualitative Research in Financial Markets, 2(3), 137-156.

Bondt (2010) paper seeks to talk about the 2008 financial turmoil that followed the fall down of the USA housing bubble which was the beginning point of a global economic crisis. Bondt paper is founded on a review of historical and theoretical facts with reference to financial regulation and financial bubbles. Bondt provides recommendations on how to restructure the global economy: in his view the world need a risk regulator that is systemic and autonomous from political as well as business influence; and novel means to recompense bankers that decrease the incentive to take too much risks. What more, Bondt suggests the need for higher capital requirements for every bank that are systemically significant; limiting commercial banks on proprietary trading; derivatives’ transparency; customer defence against faulty economic products; and the restoration of the fiduciary duty principle.

Bardos, K. S., & Zaiats, N. (2011). Measuring Residential Real Estate Risk and Return. The Journal of Wealth Management, 14(3), 73-83.

Bardos and Zaiats (2011) article begins by offering an overview of diverse developments before and leading to the global financial crisis, also the authors offer a background about real estate market as well as the real estate role in the overall financial system. The authors afterward talk about several common delusions with regard to returns from real estate venture, analyse a number of all-inclusive return measures for real estate rate, and investigates the connection between real estate return and risk. The global financial crisis according to the authors drew extraordinary interest toward real estate. Importantly, the authors point out that the key cause of the US housing bubble and, afterwards, the global financial crisis was that a lot of Americans purchased more house than they could pay for and more money was loaned by lenders than they should have. The study results established that the financial crisis took place mainly for the reason that all involved parties shared similar cognitive slip-ups concerning house prices.

Iqbal, A., & Vitner, M. (2013). Did Monetary Policy Fuel the Housing Bubble? Journal of Private Enterprise, 29(1), 1-24.

Iqbal and Vitner (2013) study endeavours to clear up the debate (causes of 2008 financial crisis) by identifying the key causative factors to the housing boom as well as measuring which factors were main drivers and which acted simply as a supporting role. The statistical analysis by the authors backs the hypothesis that global saving glut and monetary policy are statistically related with heightened financial innovation and residential development. What is more, they authors established a structural alteration is statistically related with the increase in home prices, housing starts, as well as the utilization of substitute mortgage products. The joint impact of fiscal policy with other causative factors is not statistically consequential. The authors’ further note that additional studies should examine this hypothesis through diverse methods/datasets, but importantly their results imply that this hypothesis must not be overlooked. The authors concur with a number of observers who say the 1998-2006 housing boom resulted in the global financial crisis.