Financial Crash, Commodity Prices, and Global Imbalances

By Ricardo J. Caballero, Emmanuel Farhi, P. Gourinchas. 2008

112 citations recorded by the source corpus.

The current financial crisis has its origins in global asset scarcity, which led to large capital flows toward the United States and to the creation of asset bubbles that eventually burst. In its first phase the crash exacerbated the shortage of assets in the world economy, which triggered a partial re-creation of the bubble in commodities markets, and oil markets in particular. This bubble in turn led to an increase in petrodollars seeking financial assets in the United States, which became a source of stability for the U.S. external balance. The second phase of the crisis is more conventional and began to emerge in the summer of 2008, when it became apparent that the financial crisis would permeate the real economy and sharply slow global growth. This slowdown worked to reverse the tight commodity market conditions required for a bubble to develop, ultimately destroying the commodity bubble.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/2877cd4b7b9af82418a56300c2db5b5c1b45cb43

Citations in the corpus

• The Economics of Grain Price Volatility (2011, unknown): “As Caballero et al. (2008) indicate , in the case of oil efficient inventory response is observed as a production slowdown; oil is stored most cheaply by delaying extraction.”
• Global commodity cycles and linkages: a FAVAR approach (2011, unknown): “Looking at the issue from a slightly different perspective, Anzuini et al. (2010) found some evidence that commodity price increases may have been fuelled by loose monetary policy, whereas Caballero et al. (2008) argue that the commodity price surge was caused by global imbalances.”
• International Grain Reserves and Other Instruments to Address Volatility in Grain Markets (2009, unknown): “38 See Caballero et al. (2008) for a version of this argument focused principally on the oil market.”
• Economic crisis in Europe : causes, consequences and responses (2011, unknown): “In column (1) an autoregressive specification akin to Cerra and Saxena (2008) and Furceri and Mourougane (2009) is presented, incorporating a dummy for the first year of a banking crisis.”
• Volatility Spillovers Across Petroleum Markets (2015, unknown): “Besides the above forces, oil prices might also be linked to large speculative trades (Ham­ ilton, 2009; Caballero et al., 2008) and short run destabilization in oil prices may be caused by financial investors (Lombardi and Van Robays, 2011).”
• Global imbalances and the financial crisis: products of common causes (2009, unknown): “These commentators, including Cooper (2007) and Dooley, Folkerts- Landau, and Garber (2005), as well as Caballero, Farhi, and Gourinchas (2008a) and Mendoza, Quadrini, and Rios-Rull (2007), advanced frameworks in which the global imbalances were essentially a " win-win " phenomenon, with developing…”