Causes And Policies Of Financial Crises - 1701 Words

Causes and Policies in Financial Crises Financial Crises are well-known phenomena in economics history; however, after the Great Financial Crisis of 2007-2009 the role that Central Banks play in order to prevent Financial Crises has been questioned. To begin with, it is important to understand that crises consist of highly complex macro-financial linkages that reflect the interactions between the financial sector and the real economy (Claessens 2012). Additionally, it is important to highlight two different financial crises groups: Currency and sudden stop crisis, which have strictly quantitative definitions; and debt and banking crises that depend on qualitative and judgmental analysis (Claessens 2012). Nevertheless, the interconnectivity of the financial sector demonstrates that major crises are a blend of the different types; thus, the effects on real economy are larger (Laevene 2008). In consequence, governments and central banks have the responsibility to develop monetary and macro-prudential policies to appropriatel y supervise and regulate the financial industry (Norgren 2010). However, central banks have failed to appropriately understand the main symptoms that precede financial crises: credit booms and asset booms (Bijapur 2015). In fact, it is essential to comprehend these symptoms in order to develop policies that strengthen the fragility of the financial industry; hence, upholding stable growth and inflation. The last major financial crises demonstrate that theShow MoreRelatedAnalysis of â€Å"the Global Financial Crisis: Causes, Effects, Policies and Prospects† Dominick Salvatore, Journal of Politics Society, Columbia University1110 Words   |  5 Pages Analysis of â€Å"The Global Financial Crisis: Causes, Effects, Policies and Prospects† Dominick Salvatore, Journal of Politics Society, Columbia University June 2010 Marija Nikolic December 2012 Global financial crises has brought into focus debate about decisions made by the countries which are leading economic forces, making them to reconsider past living standards and habits. With the aim to examine the causes, effects, policies and prospects for the financial crisis D.Salvatore publishedRead MoreThe Financial Crisis Of 20071646 Words   |  7 PagesThe most recent financial crisis of 2007 was felt throughout the world, and brought about huge economic consequences that are still being felt to this day. 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