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Microeconometrics of BankingMethods, Applications, and Results$
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Hans Degryse, Moshe Kim, and Steven Ongena

Print publication date: 2009

Print ISBN-13: 9780195340471

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195340471.001.0001

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Epilogue: The Banking Crisis of 2007–2008

Epilogue: The Banking Crisis of 2007–2008

(p.183) 11 Epilogue: The Banking Crisis of 2007–2008
Microeconometrics of Banking

Hans Degryse

Moshe Kim

Steven Ongena

Oxford University Press

This chapter provides an epilogue on the banking crisis of 2007–2008. It briefly discusses empirical work that investigates one of the root causes of the banking crisis: the abundance of liquidity and low short-term interest rates. When monetary policy is expansive, not only do banks give more loans to borrowers with either a bad or no credit history, but also the new loans themselves are more hazardous. Major problems in the credit markets first surfaced in the summer of 2007. Since then, liquidity has recurrently evaporated almost entirely from the interbank markets, and central banks have intervened worldwide on a scale not often seen before. This banking crisis is a source for research for many years to come.

Keywords:   banking crisis, liquidity, low interest rates, credit risk taking

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