MARKET 1 Lecture Notes - Lecture 10: Critical Role, Capital Flight, Federal Funds
Document Summary
Borio (2011): did global imbalances cause the financial crisis? (criticism of the economist (2009) article) When discussing the origins of the financial crisis, an emphasis on current-account imbalances is unhelpful. It diverts attention from monetary and financial factors really sowed the seeds of the crisis. Which view is criticized: an excess of saving over investment in em countries ( ca surpluses) is at the root of the financial crisis. Exerted downward pressure on world interest rates. Objection 1: global imbalances reveal little about global financing patterns. Shifting the focus from net to gross capital flows: casts doubt on the view that global current-account imbalances played critical role in the crisis, 1. Bulk of increase in global gross capital flows expansion came from flows between advanced economies: 2. Current accounts did not play a dominant role in determining financial flows into the us before the crisis (gross capital flows into and out of us expanded faster than net claims: 3.
