The causes of the 2007-8 subprime crisis continue to be the subject of much debate, with explanations ranging from de-regulation and fraudulent behavior to global imbalances and rising inequality. However, a comprehensive analysis of the endogenous forces that made the crisis inevitable has yet to be presented. This paper offers a ‘structural’ interpretation of the crisis by synthesising insights from conventional financial economics and the Minskyian and Schumpeterian literature. While highlighting the innovative character of US financial firms evolving from credit providers to producers of financial commodities, we stress the key features of their path towards financial fragility. We contend that financial institutions were able to achieve progressively unsustainable positions due to the ‘enforced indebtedness’ of US households, which played a functional, albeit secondary, role in the development of the crisis.

Financial production and the subprime mortgage crisis

Caverzasi E.;
2023-01-01

Abstract

The causes of the 2007-8 subprime crisis continue to be the subject of much debate, with explanations ranging from de-regulation and fraudulent behavior to global imbalances and rising inequality. However, a comprehensive analysis of the endogenous forces that made the crisis inevitable has yet to be presented. This paper offers a ‘structural’ interpretation of the crisis by synthesising insights from conventional financial economics and the Minskyian and Schumpeterian literature. While highlighting the innovative character of US financial firms evolving from credit providers to producers of financial commodities, we stress the key features of their path towards financial fragility. We contend that financial institutions were able to achieve progressively unsustainable positions due to the ‘enforced indebtedness’ of US households, which played a functional, albeit secondary, role in the development of the crisis.
2023
2023
https://link.springer.com/article/10.1007/s00191-023-00812-y
Financial firms, Innovation, Crisis, Securitization
Tori, D.; Caverzasi, E.; Gallegati, M.
File in questo prodotto:
File Dimensione Formato  
tori_financial production and the subprime mortgage crisis.pdf

accesso aperto

Tipologia: Versione Editoriale (PDF)
Licenza: Creative commons
Dimensione 3.11 MB
Formato Adobe PDF
3.11 MB Adobe PDF Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11383/2149551
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 1
  • ???jsp.display-item.citation.isi??? 1
social impact