EconPapers    
Economics at your fingertips  
 

The 2008 crisis: transpacific or transatlantic?

Robert McCauley ()

BIS Quarterly Review, 2018

Abstract: This study analyses two hypotheses that ascribe the 2008 US financial crisis to capital inflows. The Asian savings glut hypothesis posits that net inflows into high-grade US public bonds from countries running current account surpluses led to the housing boom and bust. An excess of savings over investment abroad led to an excess of US investment over savings. The European banking glut hypothesis holds that gross inflows into private bonds led to the boom. Leveraging-up by European banks enabled the leveraging-up of US households. Gross flows from Europe better matched US mortgage market trends towards private credit risk, floating interest rates and narrow spreads. What is more, European banks produced, not just invested in, US mortgage-backed securities. Their US securities affiliates held huge exposures to such securities that deserve recognition. Furthermore, European banks' leveraging-up also provided credit that enabled housing booms in Ireland and Spain. These findings favour the European banking glut hypothesis.

JEL-codes: E44 F34 G01 G21 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.bis.org/publ/qtrpdf/r_qt1812f.pdf (application/pdf)
http://www.bis.org/publ/qtrpdf/r_qt1812f.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:bisqtr:1812f

Access Statistics for this article

BIS Quarterly Review is currently edited by Christian Upper

More articles in BIS Quarterly Review from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Christian Beslmeisl ().

 
Page updated 2019-04-10
Handle: RePEc:bis:bisqtr:1812f