The Financial Crisis of 2007-09: Why Did It Happen and What Did We Learn?

Forthcoming, Review of Corporate Finance Studies

66 Pages Posted: 29 Dec 2013 Last revised: 31 Mar 2015

See all articles by Anjan V. Thakor

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business; European Corporate Governance Institute (ECGI)

Date Written: February 20, 2015

Abstract

This review of the literature on the 2007–09 crisis discusses the precrisis conditions, the crisis triggers, the crisis events, the real effects, and the policy responses to the crisis. The precrisis conditions contributed to the housing price bubble and the subsequent price decline that led to a counterparty-risk crisis in which liquidity shrank due to insolvency concerns. The policy responses were influenced both by the initial belief that it was a marketwide liquidity crunch, and the subsequent learning that insolvency risk was a major driver. I suggest directions for future research and possible regulatory changes.

Keywords: Financial crises, real effects, policy responses, and regulation

JEL Classification: G20, G21, E58, G28

Suggested Citation

Thakor, Anjan V., The Financial Crisis of 2007-09: Why Did It Happen and What Did We Learn? (February 20, 2015). Forthcoming, Review of Corporate Finance Studies, Available at SSRN: https://ssrn.com/abstract=2372449 or http://dx.doi.org/10.2139/ssrn.2372449

Anjan V. Thakor (Contact Author)

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

European Corporate Governance Institute (ECGI) ( email )

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1000 Brussels
Belgium

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