A Study On The Interactive Mechanism Between Financial Crisis And American Real Economy

In today's integrated global economy, any economic fluctuation will spread out over the whole world rapidly in a short amount of time. As the economic core, modern finance practices this thoroughly.Financial crisis of America in 2008 triggered by subprime mortgage crisis (SMC) spreads faster in speed, wider in geographic scope and has deeper impact, all can not compare with previous financial crisis.In the current round of the U.S. financial crisis, a large number of financial institutes related to subprime mortgage loan have bankruptcy and subprime mortgage bonds holders were dragged into the financial crisis quickly, then covered the entire financial market in US. Especially in September of 2008, with the bankruptcy of Lehman Brother, the acquisition of Merrill Lynch Co. by Bank of America, the transformation to be commercial bank of Goldman Sachs and Morgan Stanley, combined with the merging of Bear Stearns by JP Morgan in May of 2008, all of the Top five investment banks slumped into predicament which marking the end of an era of Wall Street. At the same time, a large number of small-and-medium-sized commercial banks were also between the beetle and the block, SMC evolved to be a financial crisis covered the whole America. On the other hand, the American financial crisis transmitted internationally through different ways and induced financial turbulence worldwide, and ultimately triggered a global financial crisis which mauled both world's financial system and real economy heavily.Many domestic and international factors brew the consequence of American financial crisis. Of all the factors, some are objective which formed by the evolvement of economic environment, Such as America's anti-terrorism policy and hegemonism, annual shrinkage of investment and exports caused foreign trade deficit, and people's pattern of psychology and behavior related to premature consumption cause USA involved in internal and external debt; as well as the long-time vacancy of public policy and market supervision, such as the increasing Housing Bubble caused by long-time low interest rates policy and easy-housing policy, the flowage of structural financial derivatives caused by the lack of far-sighted market supervision.Analyzing the financial crisis profoundly and fully, especially its reasons, transmission mechanism, impacts and future trend of development from the perspective of the real economy, has great theoretical and practical meaning to China in many aspects, such as dealing with the global financial crisis, joining in the coordination and collaboration of international economic relations and playing a role in the development of world economy as a big developing country. Summarizing the lessons of financial crisis is meaningful to China's economic-financial market which is still in the expansion and transition.The present research on the ongoing America financial crisis mainly focus on its outbreaking reasons, impacts, enlightenments and countermeasures from the single point view of financial economy, fictitious economy or international environment separately. Although some scholars have researched the impact of financial crisis on the real economy, the research on interactive mechanism between financial crisis and the real economy is still rare. The America financial crisis not only mauled the real economy of the US heavily, but also eroded the world economy through different channels of transmission mechanism and the world economy is at stake apparently. Therefore, this paper elaborates the interactive mechanism between the America financial crisis and the real economy on the basis of research results at home and abroad, aims to do some actively exploring on reinforcing the base of the real economy, adjusting the economic structure, expanding domestic demand and stabilizing the financial markets.This paper try two-pronged attempts:firstly, analyze the channels which can America financial crisis affect the real economy, including the Keynes Effect of investment network, Wicksell Effects of productive structure, wealth effect of consumption and balance-sheet effect of credits; secondly, analyze the mechanism of how can the real economy amplify the harm of financial crisis. Most governments of the world have adopted a great scale of bailout policies since the America financial crisis broke out, the problems of banks have somewhat alleviated from now on, but the problems related to enterprises are becoming worse, the influence of financial crisis is becoming extensively and profoundly in the real economy.This thesis includes five chapters:Chapter one introduces the economic context, the research significance, main research methodologies and the framework of this thesis.Chapter two is literature review. This part introduces the theories and models of financial crisis, explores the related literature's analysis of the reasons of financial crisis, points out the deficiencies of existing research and brings forward the research perspectives and research methodologies of this dissertation.Chapter three is the body section of this thesis and focus on the interactive mechanism between financial crisis and the real economy. Firstly, this part investigates the running conditions of the real economy before America financial crisis broke out. Americans'habit of premature consumption and the government's low interest rates policy and easy-housing policy since the burst of internet bubble in 2000 brought the unprecedented flourish of real estate market, and boomed the other related industries. However, the overflow of structural financial derivatives would be the source of financial crisis.Then, this part explores the eruption and transmission mechanism of the America financial crisis. The present financial crisis includes three main stages:subprime mortgage crisis, the America financial crisis and global financial crisis. The America financial crisis influenced the real economy in domestics through Keynes Effect of investment network, Wicksell Effects of productive structure, wealth effect of consumption and balance-sheet effect of credits, and simultaneity, eroded the world real economy through International Finance, international trade and international investment.Finally, this part analyses the impact of America financial crisis on the real economy through comparative static analysis, then explores how real economy can amplify the harm of financial crisis through case study:General Motors Corporation applied for bankruptcy protection.Chapter four explores anti-crisis measures carried by the American government since the America financial crisis broke out, and then supplies some policy proposal from the point view of the real economy.Chapter five summarizes the whole thesis, explores the enlightenment from the America financial crisis, points out the deficiencies and future research direction of the topic.This thesis obtains following main conclusions:(1) The deviation of fictitious economy with real economy induced the America financial crisis, and the financial crisis influenced the real economy conversely.(2)The America financial crisis affects real economy through home and abroad transmission mechanism.(3)The fundamental solution of America financial depends on the full recovery of real economy. (4)The outbreak of America financial crisis has a great impact on China's real economy, and brings many development opportunities while shocks the banking business in China.(5) World economic structure has changed greatly after the America financial crisis, China will play an important role in the process of new international financial orders forming.The innovation of this thesis includes three aspects:(1)Research the ongoing America financial crisis from the perspective of interactive mechanism between financial crisis and the real economy.(2)Divide the America financial crisis into three stages according to its influential range:subprime mortgage crisis, the America financial crisis and global financial crisis.(3) Explore the mechanism of how can America financial crisis transmit and affect the real economy from both internal and external factors of the United States.