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Global financial crisis of 2007 : analysis of origin & assessment of contagion to emerging economies : lessons & challenges for financial regulation

Abstract : This study mainly aims to investigate the origin of the global financial crisis of 2007 (2007 GFC) in United States and in other advanced economies(AEs),its macroeconomic impact on the Emerging Market Economies(EMEs) and the critical analysis of their policy response. Study highlights the regulatory challenges of the post-crisis period and discusses the implications of newly introduced regulatory reforms for the EMEs.In this aim the thesis is delineated into four chapters. First chapter of the thesis sets the theoretical context of the dissertation and presents a critical review of orthodox (mainstream/neoliberal) and the heterodox approaches on financial fragility and crisis. After giving a critique of the orthodox approach, merits and relevance of Minsky's framework known as “Financial Instability Hypothesis”(FIH) are emphasized to understand the issue of fragility in capitalist economies. Second chapter of the thesis provides a compelling compendium of various explanations and consequences of the 2007 GFC focusing on its origination in the US housing market. Main dysfunctions of the financial markets and the regulatory system that led to the eruption of financial crisis are highlighted. Third chapter presents an in-depth analysis of the contagion of the 2007 GFC to EMEs. A comparative case studies analysis highlights the policy response of selected EMEs. Fourth chapter of the thesis investigates the various financial regulatory reforms introduced in the aftermath of the 2007 GFC. Analysis in this chapter indicates that introduced reforms (The Dodd- Franck Act of 2011 and the new Basel III Banking Standards) are rooted in neoliberal philosophy so would be unable to solve the issues of fragility and financial crisis. On the basis of our analysis in these four chapters, two major conclusions are emphasized. Firstly, the financial markets should not be left to the vicissitudes of free markets, and a relevant regulatory framework having macroprudential orientations must be implemented to replace the dominant free-market-based approach. Analytical and policy insights (“big government” and “big central bank”) endorsed by heterodox economist Hyman Minsky seem appropriate to understand and constrain the fragility of capitalist market economies. Secondly, it is advisable for EMEs to adopt policies keeping in view their own macroeconomic characteristics and the level of financial development and not by the blind faith in market liberalisation or the neoliberal policy paradigm.
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Shazia Ghani. Global financial crisis of 2007 : analysis of origin & assessment of contagion to emerging economies : lessons & challenges for financial regulation. Economics and Finance. Université de Grenoble, 2013. English. ⟨NNT : 2013GRENE011⟩. ⟨tel-00987627⟩

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