FINANCIAL CRISIS

ABOUT FINANCIAL CRISIS

The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crisis, and sovereign defaults.Financial crisis directly result in a loss of paper wealth; they do not directly result in changes in the real economy unless a recession or depression follows.

Many economists have offered theories about how financial crisis develop and how they could be prevented. There is little consensus, however, and financial crisis are still a regular occurrence around the world.