Economists in the 2008 Financial Crisis: Slow to See, Fast to Act
66 Pages Posted: 23 Mar 2020 Last revised: 27 Apr 2020
Date Written: April 24, 2020
Textual analysis of 14,270 NBER Working Papers published during 1999–2016 is done to assess the effects of the 2008 crisis on the economics literature. The volume of crisis-related WPs is counter-cyclical, lagging the financial-instability-index. WPs by the Monetary-Economics, Asset-Pricing, and Corporate-Finance program members, hardly refer to “crisis/crises” in the pre-crisis period. As the crisis develops, however, their study-efforts of crisis-related issues increase rapidly. In contrast, WPs in macroeconomics-related programs refer quite extensively in the pre-crisis period to “crisis/crises” and to crises-related topics. Overall, our findings are consistent with the claim that economists were not engaged sufficiently in crises studies before the 2008 crisis. However, counter to the popular image, as soon as the crisis began to unravel, the NBER affiliated economists responded dramatically by switching their focus and efforts to studying and understanding the crisis, its causes and its consequences. Thus, although economists were slow to see the crisis coming, they were fast to act. Preliminary observations on current developments suggest that the economists’ initial response to the ongoing Covid-19 crisis is consistent with these conclusions.
Keywords: 2008 Financial Crisis, Financial Crises, Textual Analysis, LDA Topic Modeling, Securitization, Repo, Sudden Stop
JEL Classification: A11, C38, C55, E32, E44, E52, E58, F30, G01, G20, G21, G28
Suggested Citation: Suggested Citation