- Luton, England, United Kingdom
Yama Bakhtani
University of Bedfordshire, Accounting and Finance, Graduate Student
The economic slowdown and recession by the beginning of the year 2009 in the USA and most of the countries around the globe were mainly caused by the US sub-prime mortgage crisis of 2007-08. The sub-prime mortgage crisis, commonly known... more
The economic slowdown and recession by the beginning of the year 2009 in the USA and most of the countries around the globe were mainly caused by the US sub-prime mortgage crisis of 2007-08. The sub-prime mortgage crisis, commonly known as the mortgage meltdown or mortgage mess, is an ongoing crisis caused by a dramatic and sudden rise in property foreclosures in early 2007.
The loose monetary policy in early 2000 by the US government created a housing bubble where property prices were rising rapidly, thus, the immediate cause of the crisis was the bursting of the property bubble which has peaked in 2006. By late 2006 when the interest rates on subprime lending increased, the property prices went down which then caused a dramatic increase in foreclosures activities.
However; the regression analysis in this dissertation suggests that although the cut in federal interest rate may attract more and more subprime borrowers but is not a strong factor to affect global economic recessions and the crisis might have stayed just to US if institutional investors had not purchased those mortgage-backed securities from investment banks. Thus, securitization process is considered as a strong cause of the global economic slowdowns. Literature review touches on the issues that led to the crisis, while later chapter highlights the effects and adverse consequences of the crisis.
The loose monetary policy in early 2000 by the US government created a housing bubble where property prices were rising rapidly, thus, the immediate cause of the crisis was the bursting of the property bubble which has peaked in 2006. By late 2006 when the interest rates on subprime lending increased, the property prices went down which then caused a dramatic increase in foreclosures activities.
However; the regression analysis in this dissertation suggests that although the cut in federal interest rate may attract more and more subprime borrowers but is not a strong factor to affect global economic recessions and the crisis might have stayed just to US if institutional investors had not purchased those mortgage-backed securities from investment banks. Thus, securitization process is considered as a strong cause of the global economic slowdowns. Literature review touches on the issues that led to the crisis, while later chapter highlights the effects and adverse consequences of the crisis.
