When the U.S. or Europe sneezes, the rest of the world needn’t catch a cold. Global trade and financial linkages weren’t strong enough by themselves to have caused the global recession in 2008 that followed the U.S. subprime crisis, according to economics professors Philippe Bacchetta of Switzerland’s University of Lausanne and Eric van Wincoop at the University of Virginia. Self-fulfilling panics, not contagion, are to blame, they said. “The large losses of leveraged financial institutions and associated decline in credit were not directly responsible for the Great Recession,” they wrote in a special feature for the ... (full story)