Causes of the great recession of 2007-2009: The financial crisis was the symptom not the disease!

Ravi Jagannathan*, Mudit Kapoor, Ernst Schaumburg

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

14 Scopus citations

Abstract

Globalization has increasingly made it possible for labor in developing countries to augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. We argue that this large increase in the developed world's effective labor supply, triggered by geo-political events and technological innovations, coupled with the inability of existing institutions in the US and developing nations themselves to cope with this shock, set the stage for the great recession. The financial crisis in the US was but the first acute symptom.

Original languageEnglish (US)
Pages (from-to)4-29
Number of pages26
JournalJournal of Financial Intermediation
Volume22
Issue number1
DOIs
StatePublished - Jan 2013

Keywords

  • Financial crisis
  • Global imbalance
  • Globalization
  • Labor supply shock

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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