How This Crisis Differs From the 2008-2009 Financial Crisis

by Arkadiusz Sieron

There are several important differences between the global financial crisis of 2007–08 (GFC) and the coronavirus crisis (CC).

Origin and Nature of the Crisis

The GFC resulted from financial imbalances, primarily the housing bubble, while the CC was triggered by the external negative shock (the pandemic and the following economic shutdown) that dramatically reduced the labor supply. In other words, the GFC was a financial crisis, a bust phase of the business cycle triggered by a misallocation of resources toward housing and construction sectors, while the CC is a shock to the real economy triggered by the health crisis and the containment measures.

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