A Fourth Generation Model Approach on Crises: Application on Subprime Mortgage Crisis (2008)

Abstract

This paper is trying to explain the running US economy twin crisis using macroeconomic and social variables first time used in empirical works applied on United States. We consider also the influence of oil demand and real estate market to the form and turbulence of the crisis. These incidents cannot be explained using the three past crises generations or the existed fourth generation proposals so we introduced a new fourth generation crisis model specialized on the American case. The paper studies the effect of macroeconomic, market and social results bringing an innovative and wider approach in the field. The results show that the new variables of House Pricing Index and Oil Consumption along with economic freedom seem to explain the dollar’s high volatility.
Keywords: Credit crunch, Crisis analysis generations, House Pricing Index.