FinancialCrises经济危机课件

FinancialCrises经济危机2024/4/17FinancialCrises经济危机Inthischapter,youwilllearn:commonfeaturesoffinancialcriseshowfinancialcrisescanbeself-perpetuatingvariouspolicyresponsestocrisesabouthistoricalandcontemporarycrises,includingtheU.S.financialcrisisof2007-2009howcapitalflightoftenplaysaroleinfinancialcrisesaffectingemergingeconomiesFinancialCrises经济危机CommonfeaturesoffinancialcrisesAssetpricedeclinesinvolvingstocks,realestate,orotherassetsmaytriggerthecrisisofteninterpretedastheendsofbubblesFinancialinstitutioninsolvenciesawaveofloandefaultsmaycausebankfailureshedgefundsmayfailwhenassetsboughtwithborrowedfundslosevaluefinancialinstitutionsinterconnected,

soinsolvenciescanspreadfromonetoanotherFinancialCrises经济危机CommonfeaturesoffinancialcrisesLiquiditycrisesifitsdepositorsloseconfidence,abankrundepletesthebank’sliquidassetsifitscreditorshavelostconfidence,aninvestmentbankmayhavetroublesellingcommercialpapertopayoffmaturingdebtsinsuchcases,theinstitutionmustsellilliquidassetsat“firesale”prices,bringingitclosertoinsolvencyFinancialCrises经济危机FinancialcrisesandaggregatedemandFallingassetpricesreduceaggregatedemandconsumers’wealthfallsuncertaintymakesconsumersandfirmspostponespendingthevalueofcollateralfalls,makingitharderforfirmsandconsumerstoborrowFinancialinstitutionfailuresreducelendingbanksbecomemoreconservativesincemoreuncertaintyoverborrowers’abilitytorepayFinancialCrises经济危机FinancialcrisesandaggregatedemandCreditcrunch:asharpdecreaseinbanklendingmayoccurwhenassetpricesfallandfinancialinstitutionsfailforcesconsumersandfirmstoreducespendingThefallinagg.demandworsensthefinancialcrisisfallingoutputlowerfirms’expectedfutureearnings,reducingassetpricesfurtherfallingdemandforrealestatereducespricesmorebankruptciesanddefaultsincrease,bankpanicsmorelikelyOnceacrisisstarts,itcansustainitselfforalongtimeFinancialCrises经济危机CASESTUDY

Disasterinthe1930sSharpassetpricedeclines:thestockmarketfell13%on10/28/1929,andfell89%by1932Over1/3ofallbanksfailedby1933,duetoloandefaultsandabankpanicAcreditcrunchanduncertaintycausedhugefallinconsumptionandinvestmentFallingoutputmagnifiedtheseproblemsFederalReserveallowedmoneysupplytofall,creatingdeflation,whichincreasedtherealvalueofdebtsandincreaseddefaultsFinancialCrises经济危机Financialrescues:emergencyloansTheself-perpetuatingnatureofcrisesgivespolicymakersastrongincentivetointervenetotrytobreakthecycleofcrisisandrecession.Duringaliquiditycrisis,acentralbankmayactasalenderoflastresort,providingemergencyloanstoinstitutionstopreventthemfromfailing.Discountloan:aloanfromtheFederalReservetoabank,approvedifFedjudgesbanksolventandwithsufficientcollateralFinancialCrises经济危机Financialrescues:“bailouts”Govtmaygivefundstopreventaninstitutionfromfailing,ormaygivefundstothosehurtbythefailurePurpose:topreventtheproblemsofaninsolventinstitutionfromspreadingCostsof“bailouts”direct:useoftaxpayerfundsindirect:increasesmoralhazard,increasinglikelihoodoffuturefailuresandneedforfuturebailoutsFinancialCrises经济危机“Toobigtofail”Thelargertheinstitution,thegreateritslinkstootherinstitutionsLinksincludeliabilities,suchasdepositsorborrowingsInstitutionsdeemedtoobigtofail

(TBTF)

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

nearlyfailedduetoagrowingwaveofmortgagedefaults,U.S.Treasurybecametheirconservatorandmajorityshareholder,promisedtocoverlossesontheirbondstopreventalargercatastropheLehmanBrothers

declaredbankruptcy,alsoduetolossesonMBSLehman’sfailuremeantdefaultsonallLehman’sborrowingsfromotherinstitutions,shockedtheentirefinancialsystemFinancialCrises经济危机DisasterinSeptember2008AmericanInternationalGroup(AIG)

abouttofailwhentheFedmade$85bemergencyloantopreventlossesthroughoutfinancialsystemThemoneymarketcrisis

Moneymarketfundsnolongerassumedsafe,nervousdepositorspulledout(bank-runstyle)untilTreasuryDeptofferedinsuranceonMMdepositsFlighttosafety

Peoplesoldmanydifferentkindsofassets,causingpricedrops,butboughtTreasuries,causingtheirpricestoriseandinterestratestofalltonearzeroFinancialCrises经济危机Theflighttosafety:

BAAcorporatebondand90-dayT-billratesinterestrate(%)CorporatebondinterestrateTreasurybillinterestrateFinancialCrises经济危机AneconomyinfreefallFallingstockandhousepricesreducedconsumers’wealth,reducingtheirconfidenceandspending.Financialpaniccausedacreditcrunch;

banklendingfellsharplybecause:bankscouldnotresellloanstosecuritizersbanksworriedaboutinsolvencyfromfurtherlossesPreviously“safe”companiesunabletosellcommercialpapertohelpbridgethegapbetweenproductioncostsandrevenuesFinancialCrises经济危机ThepolicyresponseTARP–TroubledAssetReliefProgram(10/3/2008)$700billiontorescuefinancialinstitutionsinitiallyintendedtopurchase“troubledassets”likesubprimeMBSlaterusedforequityinjectionsintotroubledinstitutionsresult:U.S.TreasurybecameamajorshareholderinCitigroup,GoldmanSachs,AIG,andothersFederalReserveprogramstorepaircommercialpapermarket,restoresecuritization,reducemortgageinterestratesFinancialCrises经济危机ThepolicyresponseMonetarypolicy:

Fedfundsratereducedfrom2%tonear0%andhasremainedthereThefiscalstimuluspackage(February2009):taxcutsandinfrastructurespendingcostlynearly5%ofGDPCongressionalBudgetOfficeestimatesitboostedrealGDPby1.5–3.5%FinancialCrises经济危机TheaftermathThefinancialcriseseasesDowJonesstockpriceindexrose65%from3/2009to3/2010Manymajorfinancialinstitutionsprofitablein2009Sometaxpayerfundsusedinrescueswillprobablyneverberecovered,butthesecostsappearsmallrelativetothedamagefromthecrisisFinancialCrises经济危机Theaftermath:unemploymentpersistspercentoflaborforceweeksunemploymentrate(leftscale)averagedurationofunemployment(rightscale)FinancialCrises经济危机TheaftermathConstraintsonmacroeconomicpolicyHugedeficitsfromtherecessionandstimulusconstrainfiscalpolicyMonetarypolicyconstrainedbythezero-boundproblem:evenazerointerestratenotlowenoughtostimulateaggregatedemandandreduceunemploymentMoralhazardTherescuesoffinancialinstitutionswilllikelyincreasefuturerisk-takingandtheneedforfuturerescuesFinancialCrises经济危机Reformingfinancialregulation:RegulatingnonbankfinancialinstitutionsNonbankfinancialinstitutions(NBFIs)donotenjoyfederaldepositinsurance,sowerelessregulatedthanbanksSincethecrisis,manyargueforbank-likeregulationofNBFIs,including:greatercapitalrequirementsrestrictionsonriskyassetholdingsgreaterscrutinybyregulatorsControversy:moreregulationwillreduceprofitabilityandmaybefinancialinnovationFinancialCrises经济危机Reformingfinancialregulation:Addressing“toobigtofail”PolicymakershavebeenrescuingTBTFinstitutionssinceContinentalIllinoisin1984.Sincethecrisis,proposalstolimitsizeofinstitutionstopreventthemfrombecomingTBTFlimitscopebyrestrictingtherangeofdifferentbusinessesthatanyonefirmcanoperateSuchproposalswouldreversethetrendtowardmergersandconglomerationoffinancialfirms,wouldreducebenefitsfromeconomicsofscale&scopeFinancialCrises经济危机Reformingfinancialregulation:Discouragingexcessiverisk-takingMosteconomistsbelieveexcessiverisk-takingisakeycauseoffinancialcrises.Proposalstodiscourageitinclude:requiring“skininthegame”–firmsthatarrangeriskytransactionsmusttakeonsomeoftheriskreformingratingsagencies,sincetheyunderestimatedtheriskinessofsubprimeMBSreformingexecutivecompensationtoreduceincentiveforexecutivestotakeriskygamblesinhopesofhighshort-rungainsFinancialCrises经济危机Reformingfinancialregulation:ChangingregulatorystructureTherearemanydifferentregulators,thoughnotbyanylogicaldesign.Manyeconomistsbelieveinconsistenciesandgapsinregulationcontributedtothe2007-2009financialcrisis.Proposalstoconsolidateregulatorsoraddanagencythatoverseesandcoordinatesregulators.FinancialCrises经济危机CASESTUDY

TheDodd-FrankAct(July2010)establishesanewFinancialServicesOversightCounciltocoordinatefinancialregulationanewOfficeofCreditRatingswillexamineratingagenciesannuallyFDICgainsauthoritytocloseanonbankfinancialinstitutionifitstroublescreatesystemicriskprohibitsholdingcompaniesthatownbanksfromsponsoringhedgefundsrequiresthatcompaniesthatissuecertainriskysecuritieshave“skininthegame”andretainatleast5%ofthedefaultriskFinancialCrises经济危机FinancialcrisesinemergingeconomiesEmergingeconomies:middle-incomecountriesFinancialcrisesmorecommoninemergingeconomiesthanhigh-incomecountries,andoftenaccompaniedbycapitalflight.Capitalflight:asharpincreaseinnetcapitaloutflowthatoccurswhenassetholdersloseconfidenceintheeconomy,causedbyrisinggovtdebt&fearsofdefaultpoliticalinstabilitybankingproblemsFinancialCrises经济危机CapitalflightInterestratesrisesharplywhenpeoplesellbondsExchangeratesdepreciatesharplywhenpeoplesellthecountry’scurrencyContagion:thespreadofcapitalflightfromonecountrytoanotheroccurswhenproblemsinCountryAmakepeopleworrythatCountryBmightbenext,

sotheysellCountryB’sassetsandcurrency,causingthesameproblemstherelikeabankpanicFinancialCrises经济危机CapitalflightandfinancialcrisesBankingproblemscantriggercapitalflightCapitalflightcausesassetpricedeclines,whichworsensafinancialcrisisHighinterestratesfromcapitalflightandlossinconfidencecauseaggregatedemand,output,andemploymenttofall,whichworsensafinancialcrisisRapidexchangeratedepreciationincreasestheburdenofdollar-denominateddebtinthesecountriesFinancialCrises经济危机CrisisinGreeceCausedbyrisinggovtdebt,fearofdefaultAssetholderssoldGreekgovtbonds,whichcausedinterestratesonthosebondstoriseFacingasteeprecession,Greececouldnotpursuefiscalpolicyduetodebt,ormonetarypolicyduetomembershipintheEurozoneFinancialCrises经济危机CrisisinGreeceGovtbudgetdeficit,%ofGDPInterestrateson

10-yeargovtbondsGreeceGermanyFinancialCrises经济危机TheInternati