Unraveling the Economic Dynamics of the 2008 Financial Crisis: The Effects of GDP Growth, Interest Rates, and Unemployment on Default Rates

Abstract

This paper explores the complex interactions between the unemployment rate, GDP growth rate, mortgage default rate, and loan default rate during the subprime mortgage crisis in the United States. By analyzing the relationships between these key economic indicators, the study highlights the dynamics that led to the 2008 financial crisis. The study investigates how growing unemployment and a dramatic decline in GDP affected bad mortgages and the consequent explosion. By deeply researching historical information and financial theory, a precious understanding of the interconnections of these variables and their effects on the subprime crisis are provided.