Inspection Of The U.s. Subprime Loan Crisis Triggered By The Financial Contagion

From February 2007 to now, 1500 billion dollars has been lost during the global finance crisis caused by sub prime lending crisis of from America; countless world class corporations had to claim to bankrupt, for example, the Lehman Brothers holdings, Freddie Mac etc. In front of one more year lasting international Finance crisis, the central bank of many countries supply a great sum of funds to market together, in order to keep the crisis from further worsening.This article has two targets to analyze: first, which country is the source of the crisis; second, contagion of the crisis. In the end of 2008, reports from some west countries ridiculously claimed that China is root of the crisis, trying to transfer responsibility of the crisis to China. The paper argues against this acclamation through empirical analysis for this crisis. In light of special character of finance data, the article constructs GARCH model via stock index from 12 countries and uses conditional variance as volatility series of stock market from VAR system. To avoid the skewed parameter estimation of traditional regression, the argument employs Granger causes and Impulse Response Analysis for America and other countries' stock indexes; finally prove America is true root of the crisis. Therefore, results had strongly argued against the ridiculous statement that China should take the responsibility. Moreover, the argument finds an interesting phenomenon that after America gave the contagion to other countries; infected countries had a feedback contagion to America stock market in different degree. Namely, the deeply down of stock index in American market via contagion leads to many countries happen the same phenomenon, because of certain connection among these funds markets, American stock index has been down again by the infection of badly around environment and made the crisis heavily. Finally, by qualitative analysis the author argue that the certain connection are likely to from financial derivatives and financial products and which were bought by other countries corporation and finance department.