Sovereign risk and how it affects world economy determinants of the recent financial crisis: evidence from the U.S and the EU
This paper provides a review of the empirical literature on the issue of the recent financial crisis. The analysis illustrates an overview of the U.S. financial crisis and the EU sovereign debt crisis and focuses on the drivers behind the recessions of these two economic regions. Both crises were highly interconnected and essentially, the collapse of the U.S. real estate market triggered a chain of failures that negatively affected the EU markets and revealed the weaknesses of the EU periphery. I further analyze the regulatory response to these crises as to conclude that the U.S. managed to recover at a faster pace in comparison with the rest developed economies and especially the EU. Lastly, the rise of Euroscepticism raises concerns regarding the future of the EU integration and stability.