peculative bubbles and crashes a Economists say that a financial asset (stock, for example) exhibits a bubble when its price exceeds the value of the future income(such as interest or dividends) that would be received by owning it to maturity
Speculative bubbles and crashes Economists say that a financial asset (stock, for example) exhibits a bubble when its price exceeds the value of the future income (such as interest or dividends) that would be received by owning it to maturity
International financial crises a When a country that maintains a fixed exchange rate is suddenly forced to devalue its currency because of a speculative attack, this is called a currency crisis or balance of payments crIsIs
Internationalf l inancial crises When a country that maintains a fixed exchange rate is suddenly forced to devalue its currency because of a speculative attack, this is called a currency crisis or balance of payments crisis
Wider economic crises a recession: a downturn in economic growth lasting several quarters or more is usually called a recession a depression: An especially prolonged recession may be called a depression n economic stagnation: a long period of slow but not necessarily negative growth is sometimes called economic stagnation
Wider economic crises recession:A downturn in economic growth lasting several quarters or more is usually called a recession depression:An esp yp g ecially prolonged recession may be called a depression economic stagnation:a long period of slow but not necessarily negative growth is sometimes called economic stagnation
Causes of Financial crisis a Leverage: borrowing to finance investments, is frequently cited as a contributor to financial crises n Asset-liability mismatch: asset-liability mismatch a situation in which the risks associated with an institution 's debts and assets are not appropriately aligned
C f lC auses o f Financia l Crisis Leverage:borrowing to finance investments, is frequently cited as a contributor to financial crises Asset-liabilit y mismatch:asset-liabilit y mismatch, a situation in which the risks associated with an institution's debts and assets are not appropriately aligned
Causes of Financial crisis a Regulatory failures: failures of making sure institutions have sufficient assets to meet their contractual obligations through reserve requirements capital requirements and other limits on leverage a Fraud: companies have attracted depositors with misleading claims about their investment strategies or have embezzled the resulting income
C f lC auses o f Financia l Crisis Regulatory failures:failures of making sure institutions have sufficient assets to meet their contractual obligations, through reserve requirements, capital requirements, and other limits on leverage Fraud:com panies have attracted depositors with misleading claims about their investment strate gies, or have embezzled the resulting income