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
Date Written: February 20, 2015
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: Suggested Citation