As origens da crise subprime

John Taylor

New empirical research establishes a strong relationship between very low interest rates set by the Fed, as in the period 2002-2005, and a risk-taking search for yield. This policy-induced lessening of risk aversion has been emphasized by Raghu Rajan and others as a key factor bringing on the financial crisis. The new empirical support for this view is reported in the working paper “Risk, Uncertainty and Monetary Policy” by Geert Bekaert, Marie Hoerova, and Marco Lo Duca.(…)

The bottom line of this empirical research, as the authors put it, is that “lax monetary policy increases risk appetite (decreases risk aversion) in the future, with the effect lasting for about two years and starting to be significant after five months.” Their result is important to the policy debate because such monetary policy has been “cited as one of the contributing factors to the build up of a speculative bubble prior to the 2007-09 financial crisis.”

O problema irlandês: mito e realidade

“The Real Lesson About Ireland’s Austerity Plan” no e21

Analysts on the political left are using the implosion of the Irish economy to advance their mistaken narrative about the supposed dangers of reductions in public expenditures. This overlooks that any savings generated by spending cuts were more than offset by outlays associated with the €90 billion NAMA to acquire bad loans in the banking system.(…)

Policymakers should not be misled by the Irish crisis. It is debt-financed government expenditures arising from a banking crisis that’s bringing down Ireland, not austerity.

As origens da crise subprime

Da resposta de Raghuram Rajan (U.Chicago) a Paul Krugman a propósito da recensão deste ao livro “Fault Lines: How Hidden Fractures Still Threaten the World Economy” de Rajan.

It is true that the European Central Bank was less aggressive, but only slightly so; It brought its key refinancing rate down to only 2 percent while the Fed brought the Fed Funds rate down to 1 percent. Clearly, both rates were low by historical standards. More important, what Krugman does not point out is that different Euro area economies had differing inflation rates, so the real monetary policy rate was substantially different across the Euro area despite a common nominal policy rate. Countries that had strongly negative real policy rates – Ireland and Spain are primary exhibits – had a housing boom and bust, while countries like Germany with low inflation, and therefore higher real policy rates, did not. Indeed, a working paper by two ECB economists, Angela Maddaloni and José-Luis Peydró, indicates that the ultra-low rates by both the ECB and the Fed at this time had a strong causal effect in relaxing banks’ commercial, mortgage, and retail lending standards over this period.