Financial crisis : through various perspectives

Abstract

The 2007 financial crisis can be viewed from various perspectives. First, it can be explained in a wider macroeconomic context, for example by looking at the housing bubble. Monetary policy can be explained according to the BB-NN and IS-LM models. Another way to view the crisis is from a banking perspective by analyzing the changes in the financial market and the deregulation of the banking industry. As the financial sector has grown enormously over the past years, the principle of "Too Big to Fail" should also be scrutinized. Wall Street's economic power was closely related to politics, and therefore it is very helpful to study the financial crisis from a political perspective. After looking at these perspectives, the regulation system should be considered in more detail, paying special attention to systemic risk. Apart from these perspectives, there is still another way to look at the financial crisis: as a Black Swan event. I will point out how the Black Swan event can provide a framework and meaning to interpret the financial crisis. Lastly, the problem of credit rating agencies will be addressed, as this is one of the main causes of the financial crisis. The goal of this thesis is to analyze the financial crisis from various perspectives, and find an appropriate solution to prevent the next financial crisis.