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The UK Crisis of 2008: What is Real and What is Behavioural?

18 Pages Posted: 4 Apr 2009  

Yaz Gulnur Muradoglu

Queen Mary University of London; City University London - Sir John Cass Business School

Date Written: April 4, 2009

Abstract

This paper is about the crisis of 2008 in the UK. I first discuss the triggers of the crisis in the UK, then go over the immediate reactions to it in the form of short term policies and conclude with a discussion of long term policies. The crisis of 2008 has its roots in the sub-prime crisis of the US. UK imported it due to its well developed and international financial sector. Some of the triggers of the crisis of 2008 are real and some are behavioural. Systemic nature of high leverage in all sectors including financial, corporate and household, international nature of financial sector, and opacity of balance sheets are the real triggers. The underestimation of risks by almost all agents in the economy is behavioural. I argue that some of the conditions that led to the Crisis of 2008 will not change and should be regulated. Behavioural factors should now be considered carefully in designing the new regulation.

Keywords: crisis, regulation, behavioural

Suggested Citation

Muradoglu, Yaz Gulnur, The UK Crisis of 2008: What is Real and What is Behavioural? (April 4, 2009). Available at SSRN: https://ssrn.com/abstract=1373025 or http://dx.doi.org/10.2139/ssrn.1373025

Yaz Muradoglu (Contact Author)

Queen Mary University of London ( email )

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London, E1 4NS
United Kingdom

City University London - Sir John Cass Business School ( email )

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London, EC1Y 8TZ
United Kingdom
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+44 20 7040 8853 (Fax)

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