the global financial has taken the world by storm since 2007 upto date. however the causes of such a crisis are up to now not clear, but the major culprits being an implosion of subprime mortgage market in the united states that led to the collapse of northen rock andcountrywide. in april 2008, there occured a second wave when the federal reserve engineered the emerging side of the 88 year old bank bear steam.
loss of confidence by investors in the value of specialised mortgage in the u.s resulted in a liquidity crisis that prompted a substantial injection of capital into financial markets by the u.s federal reserve bank and the european central bank. moreover, commodity price volatility also impacted on the brewing of the global financial crisis.
an empirical study by john. b taylor found out that the crisis was caused out by excess monetary expansion and prolonged by by an inability to evaluate counter-party risk due to opaque financial statements. the crisis was the worsened by the unpredictable nature of government response to the crisis.
ineraction between housing markets and financial markets also contributed to the crisis. thomas freedman came up with the following on this issue
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