"Red Star Spangled Banner" Scrutinizing the Root Causes of Financial Crisis

Christian Fahrholz and Andreas Kern ()

No 05-2009, Global Financial Markets Working Paper Series from Friedrich-Schiller-University Jena

Abstract: In this article we inquire into the root causes of the present financial crisis by drawing on a Heckscher-Ohlin-Samuelson trade model. At the origin of the current crisis are global imbalances originating from distortions in relative prices. Due to impasses in international production, financial repression in countries that seek to suppress real appreciation has resulted in excessive capital-intensive production and an expansion of financial service sectors in flexible market economies. Moreover, financial globalization has been a vehicle for exporting real appreciation pressures from catching-up economies to mature economies, thus aggravating global imbalances.

Keywords: Financial Crisis; Financial Repression; Heckscher-Ohlin-Samuelson Model (search for similar items in EconPapers)
JEL-codes: E22 E44 F11 F36 F41 (search for similar items in EconPapers)
Date: 2010-06-14
New Economics Papers: this item is included in nep-cba and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:hlj:hljwrp:05-2009

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