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The global financial crisis and its transmission to New Zealand – an external balance sheet analysis

Paul Bedford

Recent global events have underscored how instability in the international financial system can have a pervasive impact on the world economy. Starting in the middle of 2007, deteriorating credit quality in the US residential mortgage market served as the catalyst for a systemic financial crisis that has spread far beyond its original source, including to New Zealand. This article aims to shed light on the channels through which these global developments have affected the domestic financial system and real economy, principally by examining the scale and composition of the international assets and liabilities that comprise New Zealand’s external balance sheet.