Spillovers to other advanced-economy financial markets included stock price declines, significant increases in sovereign yields, higher overnight interest swap rates in the United Kingdom and euro area, and rising credit spreads in some countries. Spillovers to EME asset markets were significantly stronger. Inflows to EME investment funds reversed sharply, EME currencies depreciated, and other asset prices declined. 16 II.
Clearly, this is a bit of over-simplification because, while the roots of the turmoil may have been in the sub-prime crisis, this was by no means the only factor. Excessive risk-taking by the world’s largest financial institutions: overleveraging (meaning taking risks with borrowed money) greed, and a disdain for prudential regulation also played substantial parts in a very complex mosaic.