Features of the spread of crisis phenomena in the financial...

Peculiarities of the spread of crisis phenomena in the financial and economic sphere (by the example of the USA and Europe)

By the end of 2007, the growth rate of the economy in foreign countries declined, as concerns about the state of the mortgage market in US borrowers caused a reassessment of risks in a wide range of various financial markets. Economic growth in the US has slowed sharply, reflecting the continuing adjustment in the housing sector and disorganization in financial markets.

In Europe, the decline in GDP growth rates was relatively small. European countries are a typical example of the transmission mechanism of the spread of crisis phenomena in the national segments of the world economy. It demonstrates the degree of functional interdependence of national economies and the role of an external factor in their development.

So, the collapse of the housing crediting market in the US led to a decrease in the capacity of the securities market secured by assets of the developed countries of Europe, and the tense situation with liquidity in their interbank markets led to an increase in the cost of bank financing relative to the rates of intervention (investment). European banks followed the example of American lending institutions and began shifting borrowers 'costs, which led to an increase in the borrowers' costs of servicing the loan and increasing the cost of credit resources.

The cost of financing through the issuance of bonds and shares also increased. All the largest central banks in Europe have taken active measures but restraining the growth of the value of wholesale funds by increasing the amount of liquidity supplied to the interbank market. Some central banks also introduced new instruments of intervention and expanded the list of securities accepted as collateral. As a result, the revaluation of risks led to an increase in interest rates on loans and caused a tightening of credit granting standards in developed countries of Europe.

As the main factors explaining this tightening of lending conditions in European countries, there are clear signs of worsening prospects for macroeconomic development.

As a result of the organic interconnection of the two segments of the credit sector, the tightening of the conditions for bank lending caused a reduction in access to financial resources by issuing bonds and shares. It is necessary to emphasize the novelty of the situation caused by the global financial crisis of 2008, which differs from the mechanisms of maturing and spreading the phenomena of instability in the financial markets in the late 1990s and early 2000s. Before the financial crisis of August 1998, various segments of the financial system, demonstrating the imbalance, showed an ability to at least partially compensate for the difficulties that arose in one of them, which prevented the beginning of a global collapse in the financial markets of all countries of the world. The 2008 crisis, which originated in one segment of the US financial market - mortgage lending, demonstrated the mechanism of the transmission of financial instability to other segments of the financial system of the United States and other leading countries of the world. As a result, in the current situation, financial markets, both nationally and globally, demonstrated an inability to cope with crisis phenomena, as the mechanism of interaction between the segment of bank lending and the capital market was disrupted.

The explanation of such interdependence of the US and the euro area countries is partly due to the fact that the American economic system is one of the largest trading partners for many European countries. Consequently, a temporary slowdown in the US growth rate of 1 percentage point clearly leads to a decline in growth in European advanced economies and emerging markets by about half a percentage point in two quarters. As for the secondary effect of this influence, the slowdown in the developed countries of Europe, in turn, may slow the economic growth in the European emerging market by an additional 1/4 percentage point. The results of an earlier IMF study indicate that in the case of a recession in the US, these secondary effects may be even more significant.

Nevertheless, the basic outlook for economic development prospects assumes a fairly smooth correction of growth rates. However, if we talk about positive trends, then the ratio of debt to household incomes in many developed European countries is lower than in the United States, therefore households in these countries of Europe are less susceptible to changes in credit conditions. In addition, in most countries, the practice of providing domestic loans to borrowers with a low level of creditworthiness is almost or completely absent, which should limit the scale of credit problems that would arise within the countries themselves. Finally, a historically high level of employment in the short term should provide support for domestic demand. Thus, European countries demonstrate the scenario of spreading the global financial crisis both in the segment of developed countries of the world and in emerging markets.

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