The Micro- and Macroeconomic Causes of the Financial Crisis

Bachelor Thesis from the year 2010 in the subject Business economics - Investment and Finance, grade: 1,3, University of Frankfurt (Main) (Wirtschaftswissenschaften), course: Causes and Consequences of Financial Crises, language: English, abstract: The US subprime mortgage crisis that broke out in august 2007 was triggered by mortgage delinquencies in the US and has escalated into a global financial crisis. Investor confidence sagged off, and Knightian uncertainty emerged, consequently risk premia increased and liquidity was withdrawn from interbank and credit markets. This financial disturbance and the bankruptcies of some banks and near banks (for example insurance companies, hedge funds) triggered contagiously waves of violent collapses in the financial system. The current financial crisis is adjusting the global growth cycle that was still robust over the past few years, plunging the whole world into the greatest economic crisis since 1929/30. In the following the micro- and macroeconomic causes of this financial crisis will be outlined. Moreover structural and systemic causes, i.e. global imbalances and safe asset imbalances, will be discussed and highlighted in the final synthesis.