The Financial and Economic Crisis Lecture Two: How the crisis affected the US and world economies Mike Kennedy.

Slides:

Advertisements

Similar presentations

© 2008 Northern Trust Corporation northerntrust.com The Northern Trust Experience A C C E S S. E X P E R T I S E. S E R V I C E. Paul L. Kasriel Director.

Advertisements

Copyright © 2007 Global Insight, Inc. The U.S. Economic Outlook: How Much Fallout from The Housing Meltdown? Nariman Behravesh Chief Economist NAHB April.

A2 Economics PowerPoint Briefings 2009 Euro Area in Charts tutor2u ™ tutor2u ™

Economic Assessment William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago Not So Silent Partners: Libraries and Local Economic.

1 Global Economic Fluctuation and Implications for East Asian Investment Cooperation FENG Xingyan China Foreign Affairs University May 2008.

Economic Outlook William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago Multi-Chamber Economic Outlook Luncheon Downers.

Economic & Investment Update GK Wealth Management Limited Jim Power Chief Economist, Friends First April 30th 2008.

© Experian Limited All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Limited. Other.

Connect With Concrete Construction Outlook: 2008 Ed Sullivan, Chief Economist PCA.

1 Are Cassandras right? Riccardo Faini Università di Roma Tor Vergata.

Economic Forces in American History The Great Depression.

The Current Economic Situation in the Euro Area Presentation by Nigel Nagarajan Faculty Orientation – 2009 Euro Challenge Federal Reserve Bank of Boston,

Maintaining Macroeconomic Stability in Turbulent Times: The Case of Macedonia Maintaining Macroeconomic Stability in Turbulent Times: The Case of Macedonia.

Economic Outlook for Consumers William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago University of Illinois Center for.

A Tour of The World: From Great Expectations to the Economic Downturn Based on Olivier BlanchardMacroeconomics, 5/e Prentice Hall.

GDP and Economic Challenges

Chapter 1 Why Study Money, Banking, and Financial Markets?

The Financial and Economic Crisis Lecture Two: How the crisis affected the US and world economies Mike Kennedy.

C27BA Introductory Macroeconomics Lecture 1 Introduction to Macro.

© The McGraw-Hill Companies, Inc., 2008 McGraw-Hill/Irwin Chapter 23 Modern Monetary Policy and the Challenges Facing Central Bankers.

Future Financial Forecast An update on the big economic picture for credit, interest rates and inflation. Paul Cahill Chief Executive Officer.

Appendix to Chapter 4: The Housing Boom and Bust1997– – 2006 –Housing prices almost doubled –Bubble Mid-2006 –Falling 1.

The role of the land market to provide financial stability in the EU markets Professor Elias Dinenis Neapolis University Pafos.

Estonia Another crises country. Background and History Details of the relevant history, pertinent to its economic condition. Position of the.

T HE E CONOMIC O UTLOOK : H ALF -S PEED A HEAD David Wyss Brown University December 13, 2011.

2009 BIAC BUSINESS ROUNDTABLE Global economic growth: how deep will it fall and when will it bounce back? Jonathan Coppel Counsellor, Office of the OECD.

Transmission Mechanisms of Monetary Policy

The Impact of the Financial Crisis on the Finnish housing market and Households By Elias Oikarinen Financial Crisis, Property Markets & Homeownership,

Real Estate Business Ethics. Real Estate and Consumption Increasing real estate prices has made increasing consumption possible.

The Israeli Economy: Still withstanding adverse global economic shocks December 2012.

The Economic Crisis: Facts and implications for public policy Higher Education at a Time of Crisis – Challenges and Opportunities, Copenhagen, June.

Economic Cycles. The economic cycle The economic cycle A term used to describe the tendency of economic activity to cycle along its trend path A term.

1 DOMESTIC ECONOMIC CONDITIONS Jeff Fuhrer Director of Research Federal Reserve Bank of Boston Equipment Leasing and Finance Association Credit and Collections.

1 Section 2B Financial Crisis of Overview Key events of the economic crisis The four causes of the economic crisis 3 lessons we should learn from.

The Current Global Financial Crisis and Its Impacts on the OIC Countries Dr. Murat Yulek.

The Outlook for the U.S. Economy and Home Improvement Spending James Gillula Managing Director, Consulting Services IHS Global Insight April 2014.

The Causes and Cures of the Economic Crisis Dean Baker, Co-Director Center for Economic and Policy Research April 13, 2012.

The Economic Outlook: Recession and Opportunities By Dean Baker Co-Director of the Center for Economic and Policy Research (CEPR)

Chapter 12: Gross Domestic Product and Growth Section 2

ASSET BUBBLES AND THE FINANCIAL CRISIS OF 2008? A. G. MALLIARIS Presented to the Xavier EMBA, November 26, 2008 What are Asset Bubbles? Variety of Bubbles.

Economic and Social Update April 2008 William E. Wallace, Lead Economist World Bank, Indonesia April 1, 2008.

Monetary Policy Update April Lower repo rate necessary to subdue the fall in production and employment and to attain the inflation target of two.

Meeting your business information needs. Friday at the Beach Economic Update Rick Harper, Director UWF Haas Center January 11 th, 2008.

Overview   How did the financial crisis affect us?   What are some likely hypotheses regarding the causes of the financial collapse?   What do today's.

Ok, That’s Over. What’s Next?! Stanley F. Duobinis, Ph.D. Crystal Ball Economics, Inc. Stanley F. Duobinis, Ph.D. Crystal Ball Economics, Inc.

The Economic or Business Cycle. Measuring Economic Growth We calculate the value of a country's output or wealth generated in a year by measuring GDP-Gross.

© 2011 Morningstar, Inc. All rights reserved. From Slow Straggle to Steady Stride: A Hesitant Recovery Assumes New Cadence Robert Johnson, CFA Director.

A Tour of the World Chapter 1. © 2013 Pearson Education, Inc. All rights reserved The Crisis Table 1-1 World Output Growth since 2000.

LESSONS THE U.S. CAN LEARN FROM JAPAN AND THE EUROZONE Presented by A.G. Malliaris THE TRANSFORMER ASSOCIATION SPRING MEETING Chicago, May 1, 2013.

Macroeconomics SSEMA1 Students will explain and describe the means by which economic activity is measured by looking at gross domestic products, consumer.

ECONOMIC OUTLOOK AND MONETARY POLICY RECOMMENDATIONS November 2, 2012 New York, NY.

THE EURO AND THE PROCESS OF DELEVERAGING IN THE EUROZONE Presented by A.G. Malliaris SOCIETY FOR POLICY MODELING Allied Social Science Associations Annual.

CONFIDENTIAL AND PROPRIETARY. Permission to reprint or distribute any content from this presentation requires the written approval of Standard & Poor’s.

1 APRIL 2006 Credit Trends in LA: The Chilean Experience José De Gregorio Vice Governor Central Bank of Chile.

1 Copyright  2000 by The McGraw-Hill Companies, Inc. All rights reserved The US Economic Outlook: How Long Can the Good Times Roll? TVB New York September.

The Timing and Scope of the 2002 Rebound Michael R. Englund Chief Market Economist Standard & Poor’s March of 2002.

December 3, The State of The Economy In this presentation National forecasts are produced by Global Insight, Inc. State and Metropolitan forecasts.

2008–2012 Spanish financial crisis The crisis began as part of the world FINANCIAL CRISIS and continued as part of the EUROPEAN SOVEREIGN DEBT CRISIS,

Financial Collapse Background 1997: Global economic community suffered severe downturn 1998: Strain continues with financial crisis in Russia 2001:

The Housing Bubble Fact Sheet, ISSUE BRIEF July 2005 Dean Baker.

Global economic forecast November 1st The housing market has stabilised recently but a sustained recovery is unlikely until 2011 Factors putting.

About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two.

US FED Low Interest Rate Policy of Yonsei GSIS Lei, Yanghua.

THE PERFORMANCE OF THE UK ECONOMY Geoff Riley Tutor2u.

From Recession to Recovery

Investing in interesting times

Economic Assessment The Transformer Association William Strauss

Investment and Financial Markets After the end of the high tech boom and the sharp decline in the stock market in 2000, individuals and firms began.

How Housing Has Affected the Economic “Ecology”

Economic Evironment For Business

Presentation transcript:

The Financial and Economic Crisis Lecture Two: How the crisis affected the US and world economies Mike Kennedy

The epicentre of the storm, the US economy

What happened in some individual OECD economies…

… and in the euro area

Risk aversion spiked during the crisis

Credit conditions were affected by the spike in risk…

… as was the outlook for activity

A driving factor were house prices (nominal) which fell (almost) everywhere

One offshoot of the housing boom: the US economy (and others) became unbalanced, with the share of construction rising in importance

But this wasn’t just a US phenomenon – Spain, Greece and Ireland stand out as seeing a rise in the importance of housing in their economies

Another look at housing investment in the OECD

Based on past experience, a decline in house prices would have negative effects A house price downturn, when it occurs, or even just a stabilization of prices, could: – affect consumption through reduced housing equity withdrawal and effects on perceived wealth, – be exacerbated by ratios of household debt to income which are at historical highs in several countries. The historical record suggests that in the case of a major housing downturn, spill-over effects may be large, with consumption and GDP growth on average falling from around 4% prior to a housing peak to practically nil after it. As well, with low inflation, a correction in “real” house prices would be long and slow.

A look at housing investment

Business confidence plunged …

… and non-residential investment also declined but nowhere to the extent of residential structures

Real consumption also fell but not like housing

The outlook for family incomes played a role in the US

Household balance sheets were weakened…

… in part by a fall in housing wealth

World trade collapsed…

… with both exports and imports hit hard

Intentions to hire driven by the outlook for sales

Unemployment rates rose virtually everywhere…

… but especially in the euro area

Not much of the problem was structural …

… except in certain parts of the euro area and only later

Cyclical unemployment rose during the recession in non-euro area economies

Cyclical unemployment also rose in the euro area but after the recession!

Did unusually high house prices foreshadow sharp drops in those prices? Not that well this time

Did the high real house prices foreshadow the depth of the recessions? Not really. We need to look elsewhere for that – to a banking system that was being transformed

Mortgages became an increasing share of total bank loans in the US …

… with subprime mortgages growing in importance…

… but mortgage delinquency rates were low up until 2007

Euro debt markets were affected

Credit restraint also affected euro area government bond rates but uncertainty was likely more important

Euro area is still in crisis

Was being a member of the euro a problem: Swedish (red line) and Finnish (blue) long-term interest rates

Emerging markets get hit through the financial channel

Key emerging market GDPs were affected, with some seeing large negative growth

A typical economic time series

Some scary stuff: An error correction mechanism