Financialization and the US Economy
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Financialization and the US Economy

  • New Directions in Modern Economics series

Özgür Orhangazi

Özgür Orhangazi brings together a comprehensive analysis of financialization in the US economy that encompasses the historical, theoretical, and empirical sides of the issues. He explores the origins and consequences of the dramatic rise of financial markets in the US economy and focuses on the impacts of this process of ‘financialization’ on the operations of the non-financial corporate sector.
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Chapter 2: Stylized Facts

Özgür Orhangazi

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2. Stylized facts In the first chapter, I opted for a definition of financialization at two distinct levels. At the most general level, it refers to an increase in the size, profitability and significance of the financial sector. At the NFC level, financialization is defined as the increase in both financial investments and hence financial incomes of NFCs and the increase in the amount of payments to financial markets. Here, I present detailed descriptive statistics that demonstrate these financialization trends of the post-1980 era in the US economy at both levels. These data show a continuous increase in the size and profitability of the financial sector, a secular growth in the volume of financial transactions, as well as financialization of NFCs. Before moving onto a discussion of the historical context of financialization and the theories that attempt to explain this process, it is important to depict what has actually changed in the last decades. Since the 1980s, world financial markets have been growing rapidly. The value of total global financial assets (equities, government and corporate debt securities and bank deposits) reached to 140 trillion dollars by the end of 2005 from 12 trillion in 1980, 64 trillion in 1995 and 93 trillion in 2000. Stock of global financial assets was 338 percent of the global Gross Domestic Product (GDP) in 2005, up from 109 percent in 1980 (Farrell et al. 2007: 8). For the US economy, the stock of financial assets reached 303 percent of...

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