Abstract

http://ssrn.com/abstract=1436893
 
 

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Stages of the Ongoing Global Financial Crisis: Is There a Wandering Asset-Price Bubble?


Lucjan T. Orlowski


Sacred Heart University - John F. Welch College of Business

July 21, 2009

CASE Network Studies and Analyses No. 372

Abstract:     
This study identifies five distinctive stages of the current global financial crisis: the meltdown of the subprime mortgage market, spillovers into broader credit market, the liquidity crisis epitomized by the fallout of Northern Rock, Bear Stearns with contagion effects on other financial institutions, the commodity price bubble, and the ultimate demise of investment banking in the U.S. Monetary policy responses aimed at stabilizing financial markets are proposed. The study argues that the severity of the crisis is influenced strongly by changeable allocations of global savings, which lead to over-pricing of varied types of assets. The study calls such process a “wandering asset-price bubble”. Unstable allocations have elevated market, credit and liquidity risks. Since its original outbreak induced by the demise of the subprime mortgage market and the mortgage-backed securities in the U.S., the crisis has reverberated across other credit areas, structured financial products and global financial institutions.

Number of Pages in PDF File: 26

Keywords: subprime mortgage crisis, credit crisis, liquidity crisis, market risk, credit risk, default risk, Level 3 assets, Basel II

JEL Classification: G12, G15, G21, G24

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Date posted: July 21, 2009  

Suggested Citation

Orlowski, Lucjan T., Stages of the Ongoing Global Financial Crisis: Is There a Wandering Asset-Price Bubble? (July 21, 2009). CASE Network Studies and Analyses No. 372. Available at SSRN: http://ssrn.com/abstract=1436893 or http://dx.doi.org/10.2139/ssrn.1436893

Contact Information

Lucjan T. Orlowski (Contact Author)
Sacred Heart University - John F. Welch College of Business ( email )
5151 Park Avenue
Fairfield, CT 06825
United States
203-371-7858 (Phone)
HOME PAGE: http://www.sacredheart.edu/ltorlowski.cfm
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