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The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008

This report is available to download free of charge on VoxEU.orgGlobal financial markets are showing strains on a scale and scope not witnessed in the past three-quarters of a century. What started with elevated losses on US subprime mortgages has spread beyond the borders of the United States and the confines of the mortgage market. Risk spreads have ballooned, liquidity in some market segments has dried up and large complex financial institutions have admitted significant losses. Bank runs are no longer the subject exclusively of history.
These events have challenged policy-makers, and the responses have varied across regions. The ECB has injected reserves in unprecedented volumes. The Bank of England participated in the bailout and, ultimately, the nationalization of a depository, Northern Rock. The US Federal Reserve has introduced a variety of new facilities, extended its support beyond the depository sector and has recently intervened in support of Fannie Mae and Freddie Mac.

The events have also challenged economists to explain why the crisis developed, how it is unfolding, and what can be done. This volume compiles contributions by leading economists in VoxEU.org over the past year that attempt to answer these questions.

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Reinhart, C and A Felton (eds) (2008), ‘The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008‘, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Reinhart, C and A Felton (2008), ‘Introduction: The First Global Financial Crisis of the 21st Century‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Igan, D, L Laeven and G Dell'Ariccia (2008), ‘The relationship between the recent boom and the current delinquencies in subprime mortgages‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Persaud, A (2008), ‘Why bank risk models failed‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Danielsson, J (2008), ‘Blame the models‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Wyplosz, C (2008), ‘The subprime crisis: observations on the emerging debate‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Cecchetti, S (2008), ‘The subprime series, part 1: Financial crises are not going away‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Cecchetti, S (2008), ‘The subprime series, part 2: Deposit insurance and the lender of last resort‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Cecchetti, S (2008), ‘The subprime series, part 3: Why central banks should be financial supervisors‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Cecchetti, S (2008), ‘The subprime series, part 4: Does well-designed monetary policy encourage risk- taking?‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Guiso, L and T Boeri (2008), ‘The subprime crisis: Greenspan’s Legacy‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Ongena, S, J Peydro and V Ioannidou (2008), ‘The impact of short-term interest rates on risk-taking: hard evidence‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Tabellini, G, ‘Why did bank supervision fail?‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Spaventa, L (2008), ‘The subprime crisis and credit risk transfer: something amiss‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Bordo, M (2008), ‘The crisis of 2007: some lessons from history‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Reinhart, C (2008), ‘Reflections on the international dimensions and policy lessons of the US subprime crisis‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Cecchetti, S (2008), ‘Federal Reserve policy actions in August 2007: frequently asked questions (updated)‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Monacelli, T (2008), ‘An extensive but benign crisis?‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Calomiris, C (2008), ‘Not (yet) a ‘Minsky moment’‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Buiter, W (2008), ‘A B & B future for subprime borrowers?‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Buiter, W (2008), ‘Double counting 101: the useful distinction between inside and outside assets‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Vives, X (2008), ‘Bagehot, central banking and the financial crisis‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Snower, D (2008), ‘Fallout from the credit crunch‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Snower, D (2008), ‘Four mega-dangers international financial markets face‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Cecchetti, S (2008), ‘Federal Reserve policy responses to the crisis of 2007–8: a summary‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Wyplosz, C (2008), ‘While the ECB ponders, the Fed moves – and cleverly at that‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Onado, M (2008), ‘The subprime crisis: Who pays and what needs fixing‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Spaventa, L and A Giovannini (2008), ‘Filling the information gap‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Buiter, W, ‘Lessons from the North Atlantic financial crisis‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Buiter, W (2008), ‘Lessons from Northern Rock: banking and shadow banking‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Buiter, W (2008), ‘Lessons from Northern Rock: how to handle failure‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Portes, R (2008), ‘Ratings agency reform‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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de la Dehesa, G (2008), ‘How to avoid further credit and liquidity confidence crises‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Persaud, A (2008), ‘The inappropriateness of financial regulation‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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De Grauwe, P (2008), ‘There is more to central banking than inflation targeting‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Gerlach, S and K Assenmacher (2008), ‘Can monetary policy really be used to stabilize asset prices?‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Sibert, A and W Buiter (2008), ‘A missed opportunity for the Fed‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Sibert, A and W Buiter (2008), ‘The central bank as the market-maker of last resort: from lender of last resort to market-maker of last resort‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may

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Spaventa, L (2008), ‘Avoiding disorderly deleveraging‘, in Reinhart, C and A Felton (eds), The First Global Financial Crisis of the 21st Century: Part 1 August 2007 -May 2008, CEPR Press, Paris & London. https://cepr.org/publications/books-and-reports/first-global-financial-crisis-21st-century-part-1-august-2007-may