ABSTRACT. The analysis presented in this article contributes to research on the macroeconomic significance of the shadow banks, the housing bubble and the ensuing near-collapse of the international banking system, the continued increase in housing prices after mortgage interest rates rose, and the bubble-making effect of short-term rates. The key contribution of this paper is to articulate and give expression to aspects of the management of the business cycle, the failure of risk management in the crisis, the role of poor underwriting standards in helping inflate the bubble, the restructuring of the housing-finance market, and regulation of the housing-finance market. pp. 168–173

Keywords: housing bubble, mortgage interest rates, economic crisis