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Handbook on Systemic Risk by Joseph A. Langsam, Jean-Pierre Fouque

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9

Taxing Systemic Risk

Viral V. Acharya, Lasse Pedersen, Thomas Philippon, and Matthew Richardson

9.1 Systemic risk and the financial crisis of 2007 to 2009

In the fall and winter of 2008 to 2009, the worldwide economy and financial markets fell off a cliff. The stock market fell 42 percent in the United States and, on a dollar-adjusted basis, the market dropped 46 percent in the United Kingdom, 49 percent in Europe at large, 35 percent in Japan, and around 50 percent in the larger Latin American countries. Likewise, global gross domestic product (GDP) fell by 0.8 percent (the first contraction in decades), with the decline in advanced economies a sharp 3.2 percent. Furthermore, international trade fell a whopping 12 percent.

When economists ...

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