Deciphering the Liquidity and Credit Crunch 2007-08
This paper summarizes and explains the main events of the liquidity and credit crunch in 2007-08. Starting with the trends leading up to the crisis, I explain how these events unfolded and how four different amplification mechanisms magnified losses in the mortgage market into large dislocations and turmoil in financial markets.
Non-Technical Summaries
- Author(s): Markus K. BrunnermeierSecuritization expanded credit but led to a decline in credit quality; this amplified the strain of declining housing prices and rising...
Published Versions
Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 77-100, Winter.
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