Financialization, Housing Bubble, and the Great Recession: an interpretation based on a circuit of capital model

Fernando Rugitsky ()

No 2015_24, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper offers an interpretation of the Great Recession based on Foley’s circuit of capital model. It is maintained that the contractionary effects of financialization were compensated by the housing bubble, from the mid-1990s to the early 2006. The busting of the bubble, then, was followed by the crisis. The model is calibrated with reference to quarterly data from the Flow of Funds Accounts, from 1960 to 1995. The interaction of financialization and the housing bubble, from 1996 to 2006 and from 2006 to 2009, is examined by simulating a baseline version of the model and imposing the observed shocks

Keywords: circuit of capital; stock-flow consistent models; financialization; housing buble; Great Recession (search for similar items in EconPapers)
JEL-codes: B51 E11 N12 (search for similar items in EconPapers)
Date: 2015-09-15
New Economics Papers: this item is included in nep-hme, nep-mac, nep-pke and nep-ure
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Related works:
Working Paper: FINANCIALIZATION, HOUSING BUBBLE, AND THE GREAT RECESSION: AN INTERPRETATION BASED ON A CIRCUIT OF CAPITAL MODEL (2016)
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