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1

CAUSES AND MECHANISM OF THE FINANCIAL CRISIS IN USA (Przyczyny i mechanizmy kryzysu finansowego w USA)

100%
Rosati D.
Ekonomista
|
2009
|
issue 3
315-351
EN
The purpose of the article is to explain the causes and the mechanism of the financial crisis in the United States , which was triggered by the crash on the subprime mortgage credit market in the mid - 2007. The starting point of the analysis is the standard partial equilibrum model of the mortgage credit market and the identification of the main factors determining the demand for, and supply of, mortgage credits. It is demonstrated that the traditional mortgage banking model, based on durable bilateral relationsip between the bank and the debtor, was replaced at the end of 1990. by a new model, based on securitization and globalization of financial markets. Statistical data for 1975 - 2007 are used to estimate regressions of demand and supply of credits with respect to several key variables. It is shown that the rapid expansion of mortgages credits in the US afler 1999 has been mainly the reflection of a major shift of the supply curve, which in turn was caused by a number of factors such as the abundance of financing linked to the inflows of foreign capital , securitization of illiquid credit assets, speculative growth of real estete prices, inconsistency between the traditional methods of risk assessment and the nature of the new financial instruments (derivatives), the implicit government guarantees extended to financial intermediation institutions, and the weakness of banking and proprietary supervision. On the other hand, the shift of the demand curve, caused by factors such as speculation, changes in household incomes, the fall of savings ratio and a low level of interest on mortgage credits, have been of lesser importance. (JEL Code: E44, G18, G21, G24)
2

FACTORS CREATING FAVORABLE CONDITIONS FOR A 'BUBBLE' TO DEVELOP IN THE REAL ESTATE MARKET IN THE USA AND INITIATE THE GLOBAL FINANCIAL CRISIS

100%
Nawrot W.
Myśl Ekonomiczna i Prawna
|
2008
|
issue 4(23)
84-123
EN
The aim of the article is to analyze the determinants of the latest financial crisis. The starting point for this is the analysis of trends in the American real estate market because the dynamic development of this market should be considered as a so-called 'shock' leading to the burst of the present crisis. However, the intensive development of the real estate market in the USA would not have been possible if there had not been numerous factors favorable to its boom which are discussed in detail in the article. On the other hand, the creation of the 'bubble' in the real estate market and then its 'burst' with all the negative consequences, especially serious as they can wield enormous influence on the most risky segment of innovative financial instruments based on mortgages, contributed to the burst of the financial crisis.
3

Application of network theory at commercial banks

88%
Benedek G., Lubloy A., Szenes M.
Kozgazdasagi Szemle (Economic Review)
|
2007
|
vol. 54
|
issue 7/8
682-702
EN
Network theory is widely used in many sciences and has a long tradition in the social sciences as well. The methods widely used in it might also be employed profitably by commercial banks. The article shows how the decision-making process may become biased if the network effects within a corporate client portfolio are disregarded. The authors demonstrate the potential usefulness of network theory in two distinct areas. The first set of applications relates to classical problems in banking business. Taking the network effects in the corporate client portfolio into account allows the fields of customer attrition, customer retention, customer acquisition, diffusion of various banking products, and optimal pricing policy to be addressed. The second set of applications relates to assessment of portfolio stability. If one big corporation fails or recession hits one industry, it may have a severe impact on interlinked companies and on the banking sector. Attention was paid in the article to showing how the application of network theory can create value in the banking industry.
4

The role of the credit market in consumption and saving decisions of Hungarian households

63%
Bethlendi A.
Kozgazdasagi Szemle (Economic Review)
|
2007
|
vol. 54
|
issue 12
1041-1065
EN
Looking at data for almost forty years shows it as characteristic for consumption and housing investment to be strongly preferred over financial savings in long-term behaviour by Hungarian households, despite major changes in the institutional system. An important role in this is played by the credit supply. Households are also using credit possibilities to increase their consumer and housing expenditures. The strong credit supply has been coupled with a low financial savings rate. This is not unique among European countries, but it may lead to a riskier macroeconomic path.
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