Issue No.15, 3 Oct 2007

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Bursting of the US housing bubble
The financial effects of a bird flu triggered pandemic
What's at stake from success or failure of the Doha Round
US tariffs on China to revalue counterproductive
The United States current account deficit and world markets
Oil price scenarios and the global economy
China: the implications of the policy tightening?

Credit crunch worsens US outlook

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The financial crisis of August 2007 has its roots in several developments. The fall-out from defaults on loans in the sub-prime mortgage market in the United States has received widespread publicity. But monetary policy in the United States has been tightening since June 30 2004. That tightening, in turn, became necessary because of the prior stimulus to the economy by easy monetary policy after the crash in March 2000 and subsequent slowdown. So the current crisis has its roots in developments over several years. Understanding these roots is necessary to appraise the potential effects on the real economy from the current credit crunch.

The underlying models used here have been used by international agencies, central banks, governments, fund managers and financial institutions around the world for more than a decade. But running the models and designing scenarios requires considerable investment in expertise and this has limited availability to those with modeling expertise. Due to popular demand, we now provide access to the valuable insights from the model by making available results from topical scenarios directly to clients.