How to Stop a Herd of Running Bears? Market Response to Policy Initiatives During the Global Financial Crisis

Andritzky, Jochen; Jobst, Andreas; Nowak, Sylwia; Aı̈t-Sahalia, Yacine; Tamirisa, Natalia

doi:10.2139/ssrn.1461222

Cited by 19 publications

(15 citation statements)

References 39 publications

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“…Secondly, where any contagion is detected it tends to originate from our liquidity variables, the Libor-OIS spread and/or the change in the 30-day ABCP rate. Previously, liquidity problems in the aftermath of the collapse of Lehman Brothers have been attributed to transmitting the crisis internationally (Aït-Sahalia, Andritzky, Jobst, Nowak, & Tamirisa, 2009;Brunnermeier, 2008; among others) but here we show that shocks to liquidity variables were also instrumental in exacerbating the crisis across the U.S. financial system. Thirdly, there is limited evidence that deteriorating conditions in the subprime mortgage-backed market helped to predict the transition between regimes.…”

Section: Discussionsupporting

confidence: 56%

The role of U.S. subprime mortgage-backed assets in propagating the crisis: Contagion or interdependence?

Flavin

Sheenan

2015

The North American Journal of Economics and Finance

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a b s t r a c tThough relatively small, the subprime mortgage-backed securities market is often identified as the source of the crisis that swept through the U.S. financial system from 2007 onwards. We investigate if its role in the propagation of the crisis was due to contagion or interdependence. Using a Markov-switching VAR with timevarying transition probabilities, we analyse the transmission of shocks across the financial system. We find little evidence of asset correlation changes between normal and crisis regimes and those that do occur are predominantly associated with liquidity variables. Otherwise, relationships are stable across market conditions, implying that the U.S. financial crisis was due to cross-market interdependencies rather than contagion. There is limited evidence that the deteriorating quality of the underlying assets can explain the transition from 'normal' market conditions to a high-volatility regime, although this is not consistent across model specifications.

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Section: Discussionsupporting

confidence: 56%

The role of U.S. subprime mortgage-backed assets in propagating the crisis: Contagion or interdependence?

Flavin

Sheenan

2015

The North American Journal of Economics and Finance

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“…In this regard, Aït-Sahalia et al (2009) find that, for a number of advanced economies and using an event study methodology, government interventions had a significant impact on the easing stress in the interbanking market but that this effect was smaller the more prolonged the crisis became.…”

Section: B Results After Massive Government Programs In 2009 To Addrmentioning

confidence: 99%

Global Market Conditions and Systemic Risk

González‐Hermosillo

Hesse

2011

Journal of Emerging Market Finance

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This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.Abstract: This paper examines several key global market conditions, such as a proxy for market uncertainty and measures of interbank funding stress, to assess financial volatility and the likelihood of crisis. Using Markov regime-switching techniques, it shows that the Lehman Brothers failure was a watershed event in the crisis, although signs of heightened systemic risk could be detected as early as February 2007. In addition, we analyze the role of global market conditions to help determine when governments should begin to exit their extraordinary public support measures. JEL Classification Numbers: C32, E44, G12

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“…The financial market has also proven itself to be able to absorb the greatest part of the issued money without preventing contagion at all, as observable in the problems following the sub-prime crisis (Mizen 2008;Ait-Sahalia et al 2009). Models have estimated that financial shocks on leveraged sectors and the redistribution between these sectors accounted for approximately two-thirds of the output collapse in the time after the subprime crisis (Iacoviello 2015).…”

Section: Credit Crunches and The Central Banksmentioning

confidence: 99%

How Tracking of Electronic Money might Improve Financial Market Crisis Intervention

Fischer¹

2017

MNG

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Technology has changed and will continue to change the financial system. This paper proposes a set of tools that can give control entities a more profound insight into the markets and enable them to react to crises more efficiently. The theoretical proposal presented in this paper is a control tool that has its foundation in digital currencies and enables central banks to trace some of their freshly issued money in order to understand the current market activities more profoundly. The second purpose of this basic tool is to enable further tools, which are based on the same technology. The tool that exemplifies the possibilities of the concept in this paper allows money to be targeted to a particular market sector or another market. This paper introduces this original, theoretical system and investigates its possible positive and negative impacts on the economy.

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How to Stop a Herd of Running Bears? Market Response to Policy Initiatives During the Global Financial Crisis

Cited by 19 publications

References 39 publications

The role of U.S. subprime mortgage-backed assets in propagating the crisis: Contagion or interdependence?

The role of U.S. subprime mortgage-backed assets in propagating the crisis: Contagion or interdependence?

Global Market Conditions and Systemic Risk

How Tracking of Electronic Money might Improve Financial Market Crisis Intervention

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