FinancialCrises經(jīng)濟(jì)危機(jī)課件

FinancialCrises經(jīng)濟(jì)危機(jī)2024/4/17FinancialCrises經(jīng)濟(jì)危機(jī)Inthischapter,youwilllearn:commonfeaturesoffinancialcriseshowfinancialcrisescanbeself-perpetuatingvariouspolicyresponsestocrisesabouthistoricalandcontemporarycrises,includingtheU.S.financialcrisisof2007-2009howcapitalflightoftenplaysaroleinfinancialcrisesaffectingemergingeconomiesFinancialCrises經(jīng)濟(jì)危機(jī)CommonfeaturesoffinancialcrisesAssetpricedeclinesinvolvingstocks,realestate,orotherassetsmaytriggerthecrisisofteninterpretedastheendsofbubblesFinancialinstitutioninsolvenciesawaveofloandefaultsmaycausebankfailureshedgefundsmayfailwhenassetsboughtwithborrowedfundslosevaluefinancialinstitutionsinterconnected,

soinsolvenciescanspreadfromonetoanotherFinancialCrises經(jīng)濟(jì)危機(jī)CommonfeaturesoffinancialcrisesLiquiditycrisesifitsdepositorsloseconfidence,abankrundepletesthebank’sliquidassetsifitscreditorshavelostconfidence,aninvestmentbankmayhavetroublesellingcommercialpapertopayoffmaturingdebtsinsuchcases,theinstitutionmustsellilliquidassetsat“firesale”prices,bringingitclosertoinsolvencyFinancialCrises經(jīng)濟(jì)危機(jī)FinancialcrisesandaggregatedemandFallingassetpricesreduceaggregatedemandconsumers’wealthfallsuncertaintymakesconsumersandfirmspostponespendingthevalueofcollateralfalls,makingitharderforfirmsandconsumerstoborrowFinancialinstitutionfailuresreducelendingbanksbecomemoreconservativesincemoreuncertaintyoverborrowers’abilitytorepayFinancialCrises經(jīng)濟(jì)危機(jī)FinancialcrisesandaggregatedemandCreditcrunch:asharpdecreaseinbanklendingmayoccurwhenassetpricesfallandfinancialinstitutionsfailforcesconsumersandfirmstoreducespendingThefallinagg.demandworsensthefinancialcrisisfallingoutputlowerfirms’expectedfutureearnings,reducingassetpricesfurtherfallingdemandforrealestatereducespricesmorebankruptciesanddefaultsincrease,bankpanicsmorelikelyOnceacrisisstarts,itcansustainitselfforalongtimeFinancialCrises經(jīng)濟(jì)危機(jī)CASESTUDY

Disasterinthe1930sSharpassetpricedeclines:thestockmarketfell13%on10/28/1929,andfell89%by1932Over1/3ofallbanksfailedby1933,duetoloandefaultsandabankpanicAcreditcrunchanduncertaintycausedhugefallinconsumptionandinvestmentFallingoutputmagnifiedtheseproblemsFederalReserveallowedmoneysupplytofall,creatingdeflation,whichincreasedtherealvalueofdebtsandincreaseddefaultsFinancialCrises經(jīng)濟(jì)危機(jī)Financialrescues:emergencyloansTheself-perpetuatingnatureofcrisesgivespolicymakersastrongincentivetointervenetotrytobreakthecycleofcrisisandrecession.Duringaliquiditycrisis,acentralbankmayactasalenderoflastresort,providingemergencyloanstoinstitutionstopreventthemfromfailing.Discountloan:aloanfromtheFederalReservetoabank,approvedifFedjudgesbanksolventandwithsufficientcollateralFinancialCrises經(jīng)濟(jì)危機(jī)Financialrescues:“bailouts”Govtmaygivefundstopreventaninstitutionfromfailing,ormaygivefundstothosehurtbythefailurePurpose:topreventtheproblemsofaninsolventinstitutionfromspreadingCostsof“bailouts”direct:useoftaxpayerfundsindirect:increasesmoralhazard,increasinglikelihoodoffuturefailuresandneedforfuturebailoutsFinancialCrises經(jīng)濟(jì)危機(jī)“Toobigtofail”Thelargertheinstitution,thegreateritslinkstootherinstitutionsLinksincludeliabilities,suchasdepositsorborrowingsInstitutionsdeemedtoobigtofail

(TBTF)

iftheyaresointerconnectedthattheirfailurewouldthreatenthefinancialsystemTBTFinstitutionsarecandidatesforbailouts.Example:ContinentalIllinoisBank(1984)FinancialCrises經(jīng)濟(jì)危機(jī)RiskyRescuesRiskyloans:govtloanstoinstitutionsthatmaynotberepaidinstitutionsborderingoninsolvencyinstitutionswithnocollateralExample:Fedloaned$85billiontoAIG(2008)Equityinjections:purchasesofacompany’sstockbythegovttoincreaseanearlyinsolventcompany’scapitalwhennooneelseiswillingtobuythecompany’sstockControversy:govtownershipnotconsistentwithfreemarketprinciples;politicalinfluenceFinancialCrises經(jīng)濟(jì)危機(jī)TheU.S.financialcrisisof2007-2009Context:the1990sandearly2000swereatimeofstability,called“TheGreatModeration”2007-2009:stockpricesdropped55%unemploymentdoubledto10%failuresoflarge,prestigiousinstitutionslikeLehmanBrothersFinancialCrises經(jīng)濟(jì)危機(jī)Thesubprimemortgagecrisis2006-2007:housepricesfell,defaultsonsubprimemortgages,hugelossesforinstitutionsholdingsubprimemortgagesorthesecuritiestheybackedHugelendersAmeriquestandNewCenturyFinancialdeclaredbankruptcyin2007LiquiditycrisisinAugust2007asbanksreducedlendingtootherbanks,uncertainabouttheirabilitytorepayFedfundsrateincreasedaboveFed’stargetFinancialCrises經(jīng)濟(jì)危機(jī)DisasterinSeptember2008After6calmmonths,afinancialcrisisexploded:FannieMae,FreddieMac

nearlyfailedduetoagrowingwaveofmortgagedefaults,U.S.Treasurybecametheirconservatorandmajorityshareholder,promisedtocoverlossesontheirbondstopreventalargercatastropheLehmanBrothers

declaredbankruptcy,alsoduetolossesonMBSLehman’sfailuremeantdefaultsonallLehman’sborrowingsfromotherinstitutions,shockedtheentirefinancialsystemFinancialCrises經(jīng)濟(jì)危機(jī)DisasterinSeptember2008AmericanInternationalGroup(AIG)

abouttofailwhentheFedmade$85bemergencyloantopreventlossesthroughoutfinancialsystemThemoneymarketcrisis

Moneymarketfundsnolongerassumedsafe,nervousdepositorspulledout(bank-runstyle)untilTreasuryDeptofferedinsuranceonMMdepositsFlighttosafety

Peoplesoldmanydifferentkindsofassets,causingpricedrops,butboughtTreasuries,causingtheirpricestoriseandinterestratestofalltonearzeroFinancialCrises經(jīng)濟(jì)危機(jī)Theflighttosafety:

BAAcorporatebondand90-dayT-billratesinterestrate(%)CorporatebondinterestrateTreasurybillinterestrateFinancialCrises經(jīng)濟(jì)危機(jī)AneconomyinfreefallFallingstockandhousepricesreducedconsumers’wealth,reducingtheirconfidenceandspending.Financialpaniccausedacreditcrunch;

banklendingfellsharplybecause:bankscouldnotresellloanstosecuritizersbanksworriedaboutinsolvencyfromfurtherlossesPreviously“safe”companiesunabletosellcommercialpapertohelpbridgethegapbetweenproductioncostsandrevenuesFinancialCrises經(jīng)濟(jì)危機(jī)ThepolicyresponseTARP–TroubledAssetReliefProgram(10/3/2008)$700billiontorescuefinancialinstitutionsinitiallyintendedtopurchase“troubledassets”likesubprimeMBSlaterusedforequityinjectionsintotroubledinstitutionsresult:U.S.TreasurybecameamajorshareholderinCitigroup,GoldmanSachs,AIG,andothersFederalReserveprogramstorepaircommercialpapermarket,restoresecuritization,reducemortgageinterestratesFinancialCrises經(jīng)濟(jì)危機(jī)ThepolicyresponseMonetarypolicy:

Fedfundsratereducedfrom2%tonear0%andhasremainedthereThefiscalstimuluspackage(February2009):taxcutsandinfrastructurespendingcostlynearly5%ofGDPCongressionalBudgetOfficeestimatesitboostedrealGDPby1.5–3.5%FinancialCrises經(jīng)濟(jì)危機(jī)TheaftermathThefinancialcriseseasesDowJonesstockpriceindexrose65%from3/2009to3/2010Manymajorfinancialinstitutionsprofitablein2009Sometaxpayerfundsusedinrescueswillprobablyneverberecovered,butthesecostsappearsmallrelativetothedamagefromthecrisisFinancialCrises經(jīng)濟(jì)危機(jī)Theaftermath:unemploymentpersistspercentoflaborforceweeksunemploymentrate(leftscale)averagedurationofunemployment(rightscale)FinancialCrises經(jīng)濟(jì)危機(jī)TheaftermathConstraintsonmacroeconomicpolicyHugedeficitsfromtherecessionandstimulusconstrainfiscalpolicyMonetarypolicyconstrainedbythezero-boundproblem:evenazerointerestratenotlowenoughtostimulateaggregatedemandandreduceunemploymentMoralhazardTherescuesoffinancialinstitutionswilllikelyincreasefuturerisk-takingandtheneedforfuturerescuesFinancialCrises經(jīng)濟(jì)危機(jī)Reformingfinancialregulation:RegulatingnonbankfinancialinstitutionsNonbankfinancialinstitutions(NBFIs)donotenjoyfederaldepositinsurance,sowerelessregulatedthanbanksSincethecrisis,manyargueforbank-likeregulationofNBFIs,including:greatercapitalrequirementsrestrictionsonriskyassetholdingsgreaterscrutinybyregulatorsControversy:moreregulationwillreduceprofitabilityandmaybefinancialinnovationFinancialCrises經(jīng)濟(jì)危機(jī)Reformingfinancialregulation:Addressing“toobigtofail”P(pán)olicymakershavebeenrescuingTBTFinstitutionssinceContinentalIllinoisin1984.Sincethecrisis,proposalstolimitsizeofinstitutionstopreventthemfrombecomingTBTFlimitscopebyrestrictingtherangeofdifferentbusinessesthatanyonefirmcanoperateSuchproposalswouldreversethetrendtowardmergersandconglomerationoffinancialfirms,wouldreducebenefitsfromeconomicsofscale&scopeFinancialCrises經(jīng)濟(jì)危機(jī)Reformingfinancialregulation:Discouragingexcessiverisk-takingMosteconomistsbelieveexcessiverisk-takingisakeycauseoffinancialcrises.Proposalstodiscourageitinclude:requiring“skininthegame”–firmsthatarrangeriskytransactionsmusttakeonsomeoftheriskreformingratingsagencies,sincetheyunderestimatedtheriskinessofsubprimeMBSreformingexecutivecompensationtoreduceincentiveforexecutivestotakeriskygamblesinhopesofhighshort-rungainsFinancialCrises經(jīng)濟(jì)危機(jī)Reformingfinancialregulation:ChangingregulatorystructureTherearemanydifferentregulators,thoughnotbyanylogicaldesign.Manyeconomistsbelieveinconsistenciesandgapsinregulationcontributedtothe2007-2009financialcrisis.Proposalstoconsolidateregulatorsoraddanagencythatoverseesandcoordinatesregulators.FinancialCrises經(jīng)濟(jì)危機(jī)CASESTUDY

TheDodd-FrankAct(July2010)establishesanewFinancialServicesOversightCounciltocoordinatefinancialregulationanewOfficeofCreditRatingswillexamineratingagenciesannuallyFDICgainsauthoritytocloseanonbankfinancialinstitutionifitstroublescreatesystemicriskprohibitsholdingcompaniesthatownbanksfromsponsoringhedgefundsrequiresthatcompaniesthatissuecertainriskysecuritieshave“skininthegame”andretainatleast5%ofthedefaultriskFinancialCrises經(jīng)濟(jì)危機(jī)FinancialcrisesinemergingeconomiesEmergingeconomies:middle-incomecountriesFinancialcrisesmorecommoninemergingeconomiesthanhigh-incomecountries,andoftenaccompaniedbycapitalflight.Capitalflight:asharpincreaseinnetcapitaloutflowthatoccurswhenassetholdersloseconfidenceintheeconomy,causedbyrisinggovtdebt&fearsofdefaultpoliticalinstabilitybankingproblemsFinancialCrises經(jīng)濟(jì)危機(jī)CapitalflightInterestratesrisesharplywhenpeoplesellbondsExchangeratesdepreciatesharplywhenpeoplesellthecountry’scurrencyContagion:thespreadofcapitalflightfromonecountrytoanotheroccurswhenproblemsinCountryAmakepeopleworrythatCountryBmightbenext,

sotheysellCountryB’sassetsandcurrency,causingthesameproblemstherelikeabankpanicFinancialCrises經(jīng)濟(jì)危機(jī)CapitalflightandfinancialcrisesBankingproblemscantriggercapitalflightCapitalflightcausesassetpricedeclines,whichworsensafinancialcrisisHighinterestratesfromcapitalflightandlossinconfidencecauseaggregatedemand,output,andemploymenttofall,whichworsensafinancialcrisisRapidexchangeratedepreciationincreasestheburdenofdollar-denominateddebtinthesecountriesFinancialCrises經(jīng)濟(jì)危機(jī)CrisisinGreeceCausedbyrisinggovtdebt,fearofdefaultAssetholderssoldGreekgovtbonds,whichcausedinterestratesonthosebondstoriseFacingasteeprecession,Greececouldnotpursuefiscalpolicyduetodebt,ormonetarypolicyduetomembershipintheEurozoneFinancialCrises經(jīng)濟(jì)危機(jī)CrisisinGreeceGovtbudgetdeficit,%ofGDPInterestrateson

10-yeargovtbondsGreeceGermanyFinancialCrises經(jīng)濟(jì)危機(jī)TheInternati