Reflections on the International Dimensions and Policy Lessons of the U.S. Subprime Crisis

The financial press has often characterized the 2007-2008 United States subprime mess as a new breed of crisis. Indeed, this view often points to the international repercussions of the U.S.-based crisis as evidence that the globalization of financial portfolios has introduced new channels for spillovers that were never present before. At present, there is also considerable confusion in academic and policy circles as to whether the shaky predicament of the global economy owes to contagion or to shared (common) economic fundamentals. I address these issues, in turn, and discuss some of the questions, as regards regulation of financial institutions, that the current crisis has raised