Essays on Causes of the 2008 Global Financial Crisis Case Study

Download full paperFile format: .doc, available for editing

The paper "Causes of the 2008 Global Financial Crisis" is a perfect example of a macro & microeconomics case study.   The financial crisis of 2008 has been one of the severest financial crises that the world bodies have faced since the depression of 1930. The causes which led to the financial crisis are still a topic of discussion but major factors which have been identified to lead towards the crisis are the failure of multinational companies, a rapid decrease in the value of the assets, increase in government intervention all around the globe and a change in other economic activity which resulted in widespread depression.

To deal with such a situation in the near future a market and regulatory changes have been made so that the chances of such a situation can be reduced (Wadhwani, 2008). This paper analyzes the different reasons which can be attributed to the global crisis of 2008 and linking the same with different macroeconomic and past findings so that future policies that will help to sustain such an economic depression can be developed. One of the prime reasons which have been identified for the global crisis of 2008 is the global housing bubble collapse.

It was seen that the US housing prices on a national level collapsed by 40% which affected the securities which were linked to them causing a great effect on the financial markets (Ryuhei, 2009). Stock markets all around the globe started to fall creating a liquidity credit in the market thereby affecting the liquidity position in the global economy. The US economy was experiencing heavy growth rates during the 1940s which is shown in the chart below where the economy continued to witness rapid growth until the crisis Figure 1: US Financial Growth Rate to the Crisis The event before the crisis showed a period where the US housing prices were overvalued which led to the crash.

The entire world fraternity was of the notion that housing prices always go up and don’ t move downwards which led towards overvaluation of the houses (Ahearne, Gagnon, Haltmaier and Kamin, 2002). Low initial rates on adjustable-rate mortgages (ARM) and low down payment further ignited the situation as people with the motive of short term speculation indulged into activities that were improper.


Ahearne, A., Gagnon, J., Haltmaier, J. and Kamin, S. (2002). Preventing Deflation: Lessons from Japan’s Experience in the 1990s. International Finance Discussion Papers 729 (Washington: Board of Governors of the Fed, June)

Barrell, R. and Davis, P. (2008). The Evolution of the Financial Crisis of 2007-8, National Institute Economic Review 2008, 206, 5

Barrell, R. and Karim, D. (2008). Could Early Warning Systems Have Helped to Predict the Sub-Prime Crisis? National Institute Economic Review 2008, 206, 35

Dasgupta, A. and Prat, A. (2006). Financial equilibrium with career concerns. Theoretical Economics 1, 67-93

ESCAP, (2008). Economic & Social Survey of Asia & the Pacific 2008: Sustaining Growth and Sharing Prosperity, United Nations, New York.

Ghosal, S. and Miller, M. (2006). Crises in Global Financial Markets: career-concerned traders and insured elites? Paper for presentation at Conference: “Global Imbalances and Risk Management: Has the Centre become the Periphery? Madrid

Honkapohja, S. (2009). The 1990’s financial crises in Nordic countries. Bank of Finland Research Discussion Papers

Ianchovichina, E. and Sudarshan, G. (2007). Growth Diagnostics for a Resource-Rich Transition Economy: The Case of Mongolia. World Bank Policy Research Working Paper, WPS 4396, November

Nanto, D. (2009). The Global Financial Crisis. Congressional research report, Questia Journals

Ryuhei, W. (2009). International trade during the financial crisis: WTO supervisory functions should be enhanced. Research Institute of Economy, Trade & Industry, IAA

Sen, S. (2010). The Global Crisis and Remedial Actions: a nonmainstream perspective. Working Paper 677. Annandale-on-Hudson, NY: Levy Economics Institute of Bard College

Veron, S. (2009). Impact of Financial Crisis on Investment & Trade. Japan Center for Industrial Cooperation, Seminar Report

Wadhwani, S. (2008). Should Monetary Policy Respond to Asset Price Bubbles? Revisiting the Debate. National Institut Economic Review 2008. 206, 25

Download full paperFile format: .doc, available for editing
Contact Us