Record Details

Keynote Paper: Antecedents of the Global Financial Crisis: A Multi-Factorial Phenomenon

Asia-Pacific Social Science Review

View Archive Info
 
 
Field Value
 
Title Keynote Paper: Antecedents of the Global Financial Crisis: A Multi-Factorial Phenomenon
 
Creator Tetangco, Amando M; Bangko Sentral ng Pilipinas
 
Subject Finance; Social Science
global financial crisis, subprime mortgage, recession, monetary policy, credit derivatives, financial cooperation
 
Description The antecedents of the global financial crisis have two layers: the superstructure and the microstructure. Simply put, the superstructure refers to factors than are evident and manifested in fundamental indicators while the microstructure is the psychology or what underlies those that can be seen. This paper distills the forerunner of the crisis from its roots in the early years of the 1990 decade when the US eased its monetary policy as a response to the dotcom bubble and the 9-11 terrorist attacks. The unfolding story starts in the boom in mortgages brought about by low interest rates and a liberal loan policy, which by themselves would not have brought great financial distress if the rules of the credit market have taken effect. What turned this risky behavior into the present crisis was the bundling of mortgages by financial institutions into complex securities, such as collaterized debt obligations that were largely left unregulated. Beneath the surface is the underpinning of the crisis, the underlying market psychology characterized by greed, ignorance, herd mentality, disregard for or misuse of information, exuberance, and irrationality. Though not immune to the global financial slowdown, the Philippines has buffers that can serve it in good stead during this challenging period. Domestic demand is a major growth contributor; inflationary pressures are easing; there is policy space for fiscal stimulus; external payments position is manageable; the banking system is well-capitalized; and there is low exposure to financial strains. Still, the effects of the crisis have just reached the country and have just begun to be felt. In expectation of tougher challenges that will be faced by the real and external sectors, the country's central bank has laid out its policy thrusts for 2009. These include sustaining its primary mandate of price stability; maintaining the soundness of the financial system through greater risk management among others; and strengthening engagements with its regional peers for more collaborative action. Keywords: global financial crisis, subprime mortgage, recession, monetary policy, credit derivatives, financial cooperation
 
Publisher De La Salle University
 
Contributor —
 
Date 2009-06-19
 
Type Peer-reviewed Article
—
 
Format application/pdf
 
Identifier http://www.philjol.info/philjol/index.php/APSSR/article/view/1053
10.3860/apssr.v9i1.1053
 
Source Asia-Pacific Social Science Review; Vol 9, No 1 (2009): Papers from the Sixth Secretary Alfonso Yuchengco Policy Conference; 1-14
 
Language en
 
Coverage Philippines; Global
—
—