Causes of the outbreak of the eurozone crises: the role of the USA and the European Central Bank monetary polic

Natalia Bia³ek ()
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Natalia Bia³ek: University of Information Technology and Management

"e-Finanse", 2015, vol. 11, issue 2, 47-63

Abstract: This paper argues that the loose monetary policy of two of the world’s most important financial institutions—the U.S. Federal Reserve Board and the European Central Bank—were ultimately responsible for the outburst of global financial crisis of 2008-09. Unusually low interest rates in 2001- 05 compelled investors to engage in high risk endeavors. It also encouraged some governments to finance excessive domestic consumption with foreign loans. Emerging financial bubbles burst first in mortgage markets in the U.S. and subsequently spread to other countries. The paper also reviews other causes of the crisis as discussed in literature. Some of them relate directly to weaknesses inherent in the institutional design of the European Monetary Union (EMU) while others are unique to members of the EMU. It is rather striking that recommended remedies tend not to take into account the policies of the European Central Bank.

Keywords: global financial crisis; monetary policy; monetary union; eurozone; European Central Bank; Stability and Growth Pact; euro crisis; fiscal union (search for similar items in EconPapers)
JEL-codes: E52 E58 E60 E62 F30 G01 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:rze:efinan:v:11:y:2015:i:2:p:47-63

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