Summarize “The Aftermath of Financial Crises”. Economics Essay
Reading Materials
1. “The Aftermath of Financial Crises”. The American
Economic Review, Vol. 99, No. 2, Papers and Proceedings
of the One Hundred Twenty-First Meeting of the American
Economic Association (May, 2009), pp.
*Posted on Blackboard.
Writing Instruction
• After reading the materials, briefly summarize the common
features and consequences of historical financial crises.
• You should refer to some data in the paper to support your
points. But DO NOT quote the original texts. Try to explain
with your own words.
• You DON’T need to look into other papers or data. But if
you do, list the sources at the end of your essay.
• Do not commit plagiarism. You should complete this essay
independently.
• You should write this essay in a Word file. You are
supposed to finish in 1-2 pages, with 12-point Times New
Roman font, single-spaced, justified text alignment, and
normal margins.
• Submit by Friday, April 3, 11:59EDT on Blackboard.
Reading Materials 1. “The Aftermath of Financial Crises”. The American Economic Review, Vol. 99, No. 2, Papers and Proceedings of the One Hundred Twenty-First Meeting of the American Economic Association (May, 2009), pp. *Posted on Blackboard. Writing Instruction • After reading the materials, briefly summarize the common features and consequences of historical financial crises. • You should refer to some data in the paper to support your points. But DO NOT quote the original texts. Try to explain with your own words. • You DON’T need to look into other papers or data. But if you do, list the sources at the end of your essay. • Do not commit plagiarism. You should complete this essay independently. • You should write this essay in a Word file. You are supposed to finish in 1-2 pages, with 12-point Times New Roman font, single-spaced, justified text alignment, and normal margins. • Submit by Friday, April 3, 11:59EDT on Blackboard.
Summary of “The Aftermath of Financial Crises”
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Summary of “The Aftermath of Financial Crises”
Financial crises occur when one financial intermediary or market function inefficiently and erratically ceases to function. There are two major types of financial crises, which include systemic and non-systemic crises. The latter type involves one or a section of the market sector, such as loan and savings crisis (Friedman, 2003). On the other hand, systemic financial crises entail all or nearly all commercial systems to a certain degree. An example of a systemic financial crisis is during the crisis and the Great Depression of 2008. However, there are other classes of financial crises. Those which only affect the economy’s banking sector but not the other elements of the fiscal framework, while others mostly affect currency or government debt bouts and may also affect rapid depreciation or inflation in the foreign exchange markets (Reinhart & Rogoff, 2009). Nonetheless, all these types can spread to other countries through increases in asymmetric information and deterioration of the balance sheet. This paper summarizes the effects and consequences of the aftermath of these crises.
The aftermath of severe financial crises usually has three features in common. Firstly, they lead to a deep and prolonged collapse in the market asset. In effect, the prices of real housing by an average of 35%, which last up to as long as six years after the end of the crises. Collapsing of asset market also leads to the subsequent collapse in the price of equity to an average of 55% to a tune of three and a half years (Reinhart & Rogoff, 2009). Secondly, the aftermath of a financial crisis is also characterized by significant declines in employment and output. Thirdly, severe banking crises tend to explod...
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