Innovations in mortgage finance and the onset of the Great Recession in a small open economy with a euro peg
Thomas Andersen and
Nikolaj Malchow-Møller
No 5/2015, Discussion Papers on Economics from University of Southern Denmark, Department of Economics
Abstract:
The Global Financial Crisis (GFC) of 2008 hit Denmark particularly hard. In this paper we argue that a combination of innovation in mortgage finance and the need to defend a euro exchange rate peg was partly responsible. Sustained pressure against the Danish krone forced the central bank to increase policy interest rates consecutively in the last quarter of 2008. Monetary tightening in the midst of the GFC deepened the ongoing recession for the usual Keynesian aggregate demand reasons. Innovations in mortgage finance, which had made the economy more sensitive to changes in the policy rate, exacerbated this effect.
Keywords: Global Financial Crisis; Great Recession; currency peg; financial innovation; adjustable-rate mortgages (search for similar items in EconPapers)
JEL-codes: E20 E30 E40 F33 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2015-03-10
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://www.sdu.dk/-/media/files/om_sdu/institutte ... _2015/dpbe5_2015.pdf Full text (application/pdf)
Related works:
Journal Article: Innovations in Mortgage Finance and the Onset of the Great Recession in a Small Open Economy with a Euro Peg (2015)
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:hhs:sdueko:2015_005
Access Statistics for this paper
More papers in Discussion Papers on Economics from University of Southern Denmark, Department of Economics Department of Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Astrid Holm Nielsen (astni@sam.sdu.dk).