Financial Liberation, Assets Market Fluctuation And Economic Crisis: Theoretical And Empirical Study

Subprime-credit Crisis in U.S. was developing a global crisis in short time since 2007, which has inflenced economic theory and policy deeply. On the one hand, most of the economicist in the world failed to expect appearing of the crisis, which induced the doubt to the traditional economic theory; on the other hand, the crisis made it clear that the economic policy of U.S. about free market economy was challenged. It is Necessary that both economic theory and economic policy was thought over again.Based on the theoretic literature about crisis, this paper researched on the mechanism of financial crisis and economic crisis in the developed and developing courtries since 1990s and created new analysis to study the resource of the crisis. While the economic developing levels are different, the economic systems and institutions are diversified, and there are all kinds of direct reasons to result the crisis, some similarities are deserved to pay attention to. In fact, in the past two decades, the fundamental factor is the liberation thought leading by the new economic liberalism.The important representative of the liberalism thought is financial liberation, which made the government loose the supervision on the financial market and behavior and made the competition more tense and more efficient, but it resulted in some outcome unexpected, for example, the sharp expansion of credit market, which the over-fluidity came into being in most countries and all over the world.Some of the increasing supply of money was took into the real economic field to make the output and the gross incoming increase, while the other was took into the assets market to push the assets prices to increase. Through the collateral mechanism, the credit market could expend in short time, but in the end, the increasing assets prices made ratio between the capital stock and the incoming flow down, which made the default rate ring. The credit market shrinking and the assets prices declining resulted in the financial and economic crisis. The paper researched the crisis in developed courtries and emergencing marketing economies by the stock-flow analysis.