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Portada

  • The global financial crisis: what happened and what's next

  • Inés Bustillo and Helvia Velloso
  • 2009
  • Signatura:LC/WAS/L.101, LC/L.3009-P
  • 51 pp.
  • N.Venta: E.09.II.G.15
  • Series
  • Serie estudios y perspectivas Nº4
  • ISBN: 978-92-1-121682-0
  • ECLAC
  • ISSN: 1727-9909
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Resumen

The world economy faces a deepening crisis. Since mid-September 2008, global economic conditions have deteriorated sharply. The bankruptcy of Lehman Brothers has marked the beginning of a period of unraveling in world financial markets, with trust among financial institutions evaporating. Lending has dropped precipitously since then, credit spreads have widened sharply, stock markets have plunged and economies everywhere are stumbling. Financial institutions and hedge funds in developed economies are rapidly pulling out massive amounts of money from emerging markets. International lines of credit, the lifeblood of international transactions, have also frozen, affecting trade and leading to reduced export earnings.

Governments have undertaken unprecedented measures in response to the financial crisis, including some coordinated government intervention. However, global economic prospects remain troubled, and further policy action is required in the near future. A consensus has emerged that the policy response to the current crisis, given its global nature, should be coordinated. Coordinated action to reform the financial system will also be essential to address weaknesses in financial markets around the world.

The Group of Twenty (G20) countries1 agreed to a set of common principles to reform financial markets. It may still be early to identify all the necessary steps to successfully reform the global regulatory system when it is not clear yet all the lessons that can be learned from the current crisis or how much of regulation should be transnational. However, it is important that countries start the process of discussing a new framework that would reflect their financial interconnectedness. The November 2008 summit was a first step on the road to define the right framework for the international financial architecture of the 21st century.

In order to better understand the task before policy makers today as they chart a new direction for their economies, this paper examines the events that led the global economy to its current predicament. We start by looking at the current debate about the causes of this crisis, listing the elements most explanations have focused so far. In the second section, we look back at the sequence of events that contributed to create havoc in financial markets, as well as the policy response to these events. Next, we discuss the impact on Latin American financial markets and how this crisis may bring the region’s expansion of the past six years to a halt. In the fourth section, we discuss how the world leaders can move forward, focusing on the G20 Summit that took place in November 2008. Finally, we offer some final thoughts on the initial lessons from this crisis, as well as suggestions on what the priorities should be as the world economies respond to the challenges ahead.

Categorías

Finanzas, Sector financiero y monetario