November 17, 2009

Alan Greenspan shoulders some of the blame for what happened later on. But that is not the only point we want to make. Another point is that markets are not isolated and disturbances in one market affect other markets. Contagion across markets is a result of interdependencies of the sort outlined in this section. The reserve requirement links the credit and money markets and policymakers need to be aware of the impact of these interdependencies and how shocks in one market propagate to other markets.

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