scholarly journals What Did Central Banks Learn from Financial Crises?

2021 ◽  
Vol 66 (4) ◽  
pp. 497-512
Author(s):  
Andrzej Sławiński
Keyword(s):  
Financial Crises ◽  
Currency Crises ◽  
Global Financial Crisis ◽  
The United States ◽  
Central Banks ◽  
Lessons Learned ◽  
The Great Depression ◽  
The Global Financial Crisis ◽  
Floating Exchange Rates ◽  
Entire Economy

Abstract During the global financial crisis (GFC) of 2007–2009 and the currentCovid-19 debacle, central banks acted quickly, boldly, and effectively. The paper argues that they did so thanks to the lessons learned from the past financial crises, which provided them with opportunities to reconsider their previous beliefs. A case in point is the banking crisis in the United States during the Great Depression of the 1930s that taught central banks to act rapidly and decisively in order to prevent an initial liquidity crisis from escalating into a solvency crisis leading to bankruptcies of banks with potentially disastrous consequences for the entire economy. The paper revisits the consequences of the currency crises of the 1990s, which transformed exchange rate regimes across the world: the EMS one of 1992–1993 that accelerated the launch of the euro, and the Asian one of 1997–1998 resulted in the proliferation of floating exchange rates in emerging economies.

Financial Crises in American History

2021 ◽  
Author(s):  
Christoph Nitschke ◽  
Mark Rose
Keyword(s):  
United States ◽  
19Th Century ◽  
American History ◽  
Financial Crises ◽  
Global Financial Crisis ◽  
The United States ◽  
Political Processes ◽  
The Global Financial Crisis ◽  
Changing Economy ◽  
Political Design

U.S. history is full of frequent and often devastating financial crises. They have coincided with business cycle downturns, but they have been rooted in the political design of markets. Financial crises have also drawn from changes in the underpinning cultures, knowledge systems, and ideologies of marketplace transactions. The United States’ political and economic development spawned, guided, and modified general factors in crisis causation. Broadly viewed, the reasons for financial crises have been recurrent in their form but historically specific in their configuration: causation has always revolved around relatively sudden reversals of investor perceptions of commercial growth, stock market gains, monetary availability, currency stability, and political predictability. The United States’ 19th-century financial crises, which happened in rapid succession, are best described as disturbances tied to market making, nation building, and empire creation. Ongoing changes in America’s financial system aided rapid national growth through the efficient distribution of credit to a spatially and organizationally changing economy. But complex political processes—whether Western expansion, the development of incorporation laws, or the nation’s foreign relations—also underlay the easy availability of credit. The relationship between systemic instability and ideas and ideals of economic growth, politically enacted, was then mirrored in the 19th century. Following the “Golden Age” of crash-free capitalism in the two decades after the Second World War, the recurrence of financial crises in American history coincided with the dominance of the market in statecraft. Banking and other crises were a product of political economy. The Global Financial Crisis of 2007–2008 not only once again changed the regulatory environment in an attempt to correct past mistakes, but also considerably broadened the discursive situation of financial crises as academic topics.

Dating Banking and Currency Crises in Turkey, 1990-2014

2016 ◽  
pp. 240-273
Author(s):  
Ali Ari ◽  
Raif Cergibozan ◽  
Sedat Demir
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Early Warning System ◽  
Currency Crises ◽  
Global Financial Crisis ◽  
Empirical Studies ◽  
Banking Crisis ◽  
Warning System ◽  
Turkish Economy ◽  
The Global Financial Crisis

The last two decades characterized by financial crisis episodes have seen a proliferation of empirical studies. These early warning system models allowed researchers to distinguish certain key determinants of financial crises, and helped predicting and preventing the occurrence of some crises. However, crises continue to arise as recently illustrated by the onset of the global financial crisis. This clarifies that there are still a lot to learn about financial crises. In this sense, this paper aimed to compare the performance of several currency and banking crisis indicators within the Turkish economy which underwent severe financial crises in the last twenty years. Different currency crisis indicators performed well by detecting the 1994, 2001 and 2008 currency crises, while banking crisis indicators had significant inconsistencies. However, two banking crisis indicators we developed stand for valuable efforts in dating banking crises by constructing aggregate indexes, and contribute significantly to the empirical crisis literature.

Central Banks and Their Limits in a Pandemic

2021 ◽  
pp. 97-112
Author(s):  
Christian Hofmann
Keyword(s):  
Financial Stability ◽  
Global Financial Crisis ◽  
The United States ◽  
Central Banks ◽  
Current Crisis ◽  
Global Context ◽  
The United Kingdom ◽  
Ambiguous Situation ◽  
The One ◽  
The Global Financial Crisis

This chapter details the reactions of central banks to the current Covid-19 pandemic and contrasts them with their monetary policy operations during normal (non-crisis) times and their reactions to the Global Financial Crisis (GFC) of 2007–2009. It situates the response of central banks in Asia within a global context, examining and comparing the responses of central banks in the United States, the Euro area, the United Kingdom, Japan, Singapore and Hong Kong. Moreover, the chapter explains why this crisis is unprecedented, making it dangerous in terms of financial stability and state finances and difficult for central banks to return to normality. In the current crisis, central banks find themselves in an ambiguous situation. On the one hand, they are better prepared than they were thirteen years ago when the GFC erupted. On the other hand, relying on experience from the GFC comes with risks. No two crises are ever the same, and this is especially true for the Covid-19 pandemic. Financial markets and economies are not the triggers of this crisis as they were in many previous crises when central banks had to react swiftly and forcefully; instead, they have fallen victim to a calamity that paralyzes society, trade, and business globally.

The Memory of Financial Crises

2021 ◽  
pp. 18-38
Author(s):  
Youssef Cassis ◽  
Anna Knaps
Keyword(s):  
Financial Crisis ◽  
Great Depression ◽  
Financial Crises ◽  
Global Financial Crisis ◽  
Financial System ◽  
Social Scientists ◽  
Preliminary Attempt ◽  
The Great Depression ◽  
The Press ◽  
The Global Financial Crisis

Are financial crises actually remembered—and if so, how and by whom? Surprisingly, there has hardly been any attempt to answer this question, whether by economists or historians or indeed other social scientists. And yet they are extremely important questions to address, if we want to understand not only the causes and consequences of financial crises, but more generally how the modern financial system has been shaped. This chapter is a preliminary attempt to answer these questions. This will be done in two steps: first by considering the notion of memory and the extent to which it can be used to in connection with financial crises; and second by providing some evidence, mostly drawn from the press, on the memory of the financial crises of the Great Depression, especially in connection with the Global Financial Crisis of 2008.

scholarly journals Global Banks’ Dollar Funding

2020 ◽  
Vol 20 (113) ◽  
Author(s):  
Adolfo Barajas ◽  
Andrea Deghi ◽  
Claudio Raddatz ◽  
Dulani Seneviratne ◽  
Peichu Xie ◽  
...  
Keyword(s):  
United States ◽  
Emerging Economies ◽  
Global Financial Crisis ◽  
The United States ◽  
Central Banks ◽  
Negative Effects ◽  
Related Factors ◽  
Us Dollar ◽  
The Global Financial Crisis ◽  
Global Banks

Leading up to the global financial crisis, US dollar activity by global banks headquartered outside the United States played a crucial role in transmitting shocks originating in funding markets. Although post-crisis regulation has improved banking systems’ resilience, US dollar funding remains a global vulnerability, as evidenced by strains that reemerged in March 2020 in the midst of the COVID-19 crisis. We show that shocks to US dollar funding costs lead to financial stress in the home economies of these global non-US banks, and to spillovers to borrowers, especially emerging economies. US dollar funding vulnerability amplifies these negative effects, while some policy-related factors act as mitigators, such as swap line arrangements between central banks and international reserve holdings. Thus, these vulnerabilities should be monitored and, to the extent possible, controlled.

Financial Turbulence and Crisis

2021 ◽  
Author(s):  
Caner Bakir ◽  
Sinan Akgunay ◽  
Mehmet Kerem Coban
Keyword(s):  
Financial Crisis ◽  
Financial Crises ◽  
Global Financial Crisis ◽  
The United States ◽  
Socioeconomic Outcomes ◽  
Explanatory Factors ◽  
The United Kingdom ◽  
Political Outcomes ◽  
The Global Financial Crisis ◽  
The Impact

Why do financial turbulence and crises occur? What are different types of financial crises? Why do different countries experience financial crises, while some are more resilient? These are intriguing questions that relate to financial turbulence and crisis. The financial system is inherently susceptible to turbulence and crises: The world has witnessed several rounds of financial turbulence since the early 2000s. The 2008 global financial crisis and the worldwide financial turbulence that took place following the impact of the COVID-19 pandemic are examples. Periods of financial turbulence relate to heightened uncertainty and volatility in financial markets, and some of those periods can trigger financial crises. It is puzzling that although some countries can weather financial turbulence without falling into a financial crisis, others do not. This was observed during the global financial crisis. For example, financial turbulence triggered a financial crisis in some of the liberal market economies such as the United States and the United Kingdom. In contrast, Australia and Canada remained relatively resistant to financial turbulence. The existing literature tends to justify how and why a period of financial turbulence resulted in a financial crisis by looking at individual structural-, institutional-, or actor-level factors. In addition to the independent (separate) effects of these three principal explanatory factors, there is a need for detecting and analyzing their individual; interactive; and/or cumulative structural, institutional, and agential explanatory factors at work. Thus, it is crucial to explore some of the interrelated dynamics informing agency behavior which generate socioeconomic outcomes. Specifically, we call for a rigorous and refined analysis of how and why complementarities and enabling conditions that stem from interactions between structural and institutional factors influence actors’ agency and socioeconomic/political outcomes.

Ocena antykryzysowej polityki gospodarczej Stanów Zjednoczonych i wybranych państw członkowskich Unii Europejskiej w latach 2005–2014

2016 ◽  
pp. 26-46
Author(s):  
Marcin Jan Flotyński
Keyword(s):  
United States ◽  
European Union ◽  
Financial Markets ◽  
Global Economy ◽  
Global Financial Crisis ◽  
The United States ◽  
The European Union ◽  
High Volatility ◽  
The Global Financial Crisis ◽  
Domestic Products

The global financial crisis in 2007–2009 began a period of high volatility on the financial markets. Specifically, it caused an increased amplitude of fluctuations of the level of gross domestic products, the level of investment and consumption and exchange rates in particular countries. To address the adverse market circumstances, governments and central banks took actions in order to bolster the weakening global economy. The aim of this article is to present the anti-crisis actions in the United States and selected member states of the European Union, including Poland, and an assessment of their efficiency. The analysis conducted indicates that generally the actions taken in the United States in response to the crisis were faster and more adequate to the existing circumstances than in the European Union.

A Global Perspective on Securitized Debt

2018 ◽  
Author(s):  
Steven L Schwarcz
Keyword(s):  
United States ◽  
Financial Crisis ◽  
Capital Market ◽  
Global Financial Crisis ◽  
The United States ◽  
Global Perspective ◽  
Capital Markets Union ◽  
The Global Financial Crisis ◽  
Asset Backed Securities ◽  
The Eu

Securitisation represents a significant worldwide source of capital market financing. European investors commonly invest in asset-backed securities issued in U.S. securitisation transactions, and vice versa One of the key goals of the European Commission's proposed Capital Markets Union (CMU) is to further facilitate securitisation as a source of capital market financing as a viable alternative to bank-based finance for companies operating in the EU. To that end, this chapter explains securitisation and attempts to put its rise, its decline after the global financial crisis, and its recent CMU-inspired revival into a global perspective. It examines not only securitisation's relationship to the financial crisis but also post-crisis comparative regulatory approaches in the EU and the United States.

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