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2008 Financial Crisis Summary

180 Words1 Pages
The authors Franklin Allen and Elena Carletti mainly criticises in this journal regarding the bubble in the real estate prices which played the basic role in the financial crisis of 2008. A mixture of cheap credit and easy accessibility of funds led to a creation of bubble. The journal marks out the findings of Reinhart’s (2008) and Rogoff’s (2009) that there is an average drop of 35% in housing prices over a period of 6 years. Equity prices and productivity decrease 55% over 3½ years and by 9% in 2 years respectively, while unemployment ratio rises by 7% over a period of 4 years. Central government’s liability increases to 86% compared to its pre-crisis level. The article specifies the root cause of the crisis that is mapped out to be the
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