...Financial Crisis Introduction In recent decades, financial crises have stopped the momentum of economic development of many countries around the world. In some cases, they have destroyed almost completely different financial systems. The term financial crisis is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal 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 crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Financial crises directly result in a loss of paper wealth but do not necessarily result in changes in the real economy. Many economists have offered theories about how financial crises develop and how they could be prevented. There is no consensus, however, and financial crises continue to occur from time to time. The purpose of this study is to analyze the causes of financial crisis, the types of financial crisis and the impact caused in the countries that have experienced them. Explanation of financial crisis Financial crises have come in many forms although they have many common elements. A financial crisis is often associated with one or more of the following phenomena: substantial changes in credit volume and asset prices, severe disruptions in financial intermediation and...
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...rapidly. This is a "housing bubble." The danger in this situation is that the market will not be capable of sustaining the inflated prices, so the value of properties begins to come down, sometimes rapidly. Definition of a Housing Bubble * A "housing bubble" is a cyclical economic event where high trade volumes inflate prices, which ultimately become unsustainable, causing a lowering, or "crash" in values. Economic bubbles may be called by a variety of terms, including a speculative bubble, a market bubble or a balloon. Economic cycles of this nature are not exclusive to real estate. They have occurred throughout history in a variety of markets, including stocks, tulips and pottery. Contributing Factors to Unstable Housing Conditions * It could be argued that a housing bubble is really an example of a credit bubble. Although real estate is the underlying commodity, most house buyers use credit -- in the form of a mortgage -- to secure the property. Lax lending guidelines, rapidly inflating values, speculative buyers and the use of adjustable rate mortgages (ARMs), which can adjust to higher rates, are all factors in accelerating the likelihood of borrowers defaulting on their loans. The Effect a Housing Bubble Has on Local Markets * Tighter credit is likely to result after a housing bubble bursts; and although the effects following the downturn may have a broad effect on consumer purchasing power, the depth and duration of the housing bubble effects will vary drastically...
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...Euro area is set to repeat Japan’s prolonged period of stagnation and deflation: former BOJ Governor Masaaki Shirakawa (unclear, but Euro area recovery requires addressing the underlying problem of economic integration and not its symptom, deflation), GS Chief European Economist Huw Pill (low growth and even some deflation similar to Japan, in terms of outcome if not in terms of causes, are likely in the short term, but – also akin to Japan – a deflationary spiral is not), and LSE Professor Paul De Grauwe (there is a real risk of this outcome or worse unless policies change). We conclude that Euro area economies and assets could escape Japan’s fate but warn that Euro area stagnation would have a greater impact on the global economy than did Japan’s. Inside Interview with Masaaki Shirakawa Former Governor of the Bank of Japan 4 Headed for Japanese-style deflation? Silvia Ardagna, GS Rates Strategy 6 Interview with Huw Pill GS Chief European Economist 8 Euro area stagnation and its discontents Jose Ursua, GS Global Economics Research 10 Interview with Paul De Grauwe Professor, London School of Economics 14 European equities: a different story Sharon Bell, GS Portfolio Strategy 16 A look back at Japan’s deflation drivers Naohiko Baba, GS Japan Economics 18 Source: www.istockphoto.com I don’t see why [sovereign QE] couldn’t be as effective [in the Euro area] as in the US and in the UK. But even full-blown QE would lose...
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...Effects of The European Debt Crisis on the German Real Estate Market Hiermit versichere ich die vorliegende Arbeit allein und nur mit den angegebenen Hilfsmitteln angefertigt zu haben. Der Veröffentlichung der Bachelorarbeit in der Bibliothek der Hochschule Aschaffenburg wird zugestimmt. Aschaffenburg, den 28.02.2013 Effects of the European Debt Crisis on the German Real Estate Market Bachelorarbeit von Sebastian Stollhof 28.02.2013 Effects of The European Debt Crisis on the German Real Estate Market Autor: Sebastian Stollhof An der Bergleite 3 67806 Rockenhausen Erstprüfer: Prof. Dr. Paschedag HOCHSCHULE ASCHAFFENBURG FAKULTÄT WIRTSCHAFT UND RECHT WÜRZBURGER STRASSE 45 D-63743 ASCHAFFENBURG Table of Content TABLE OF EXHIBITS LIST OF ABBREVIATIONS 1 EMERGENCE OF THE DEBT CRISIS 1.1 Macroeconomic problems 1.1.1 The imbalance of public authorities 1.1.2 Strongly diverging current account balances 1.1.3 Strongly diverging price- and wage developments 1.2 Specific problems within the monetary union VIII IX 1 1 1 5 10 12 1.2.1 Interest rate policy of the European Central Bank (ECB) 12 1.2.2 Membership within the EMU increases insolvency risk for states 1.2.3 National fiscal policy versus central monetary policy 2 GERMAN HOUSING MARKET – PRICE BUBBLE OR SAFE HAVEN? 2.1 Definition of price bubbles 2.2 Explanatory approaches for real estate bubbles 2.2.1 Macroeconomic factors 2.2.2 Institutional explanatory approaches 2.2.3 Behaviour-based explanatory...
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...A STUDY OF FINANCIAL CRISIS AND ITS IMPACT ON STOCK MARKET A MANAGEMENT RESEARCH PROJECT SUBMITTED TO DHARMSINH DESAI UNIVERSITY FOR THE PARTIAL FULFILLMENT OF FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA) SUBMITTED BY CHARMI S. SHAH ROLL NO.: 42 UNDER THE GUIDANCE OF Dr. FALGUNI PANDYA ASSISTANT PROFESSOR (FINANCE) CENTRE FOR MANAGEMENT STUDIES DHARMSINH DESAI UNIVERSITY NADIAD 2014 DECLARATION I hereby declare that the project titled “FINANCIAL CRISIS AND ITS IMPACT ON THE STOCK MARKET” is my own work and I have not copied it from somewhere else. The project report is prepared just as a part of partial fulfillment of MBA programme and no other use of this project will be done. MANAGEMENT RESEARCH PROJECT is a part of syllabus in MBA programme of CMS – DDU , Nadiad, Gujarat. Name : Charmi S. Shah Signature : Date : 21st February, 2014 CENTRE FOR MANAGEMENT STUDIES DHARMSINH DESAI UNIVERSITY CERTIFICATE This is to certify that the Management Research Project has been Carried Out under the theme “FINANCIAL CRISIS AND ITS IMPACT ON STOCK MARKET”. This report is the bonafide work of Ms. Charmi Shah Roll Number 1542 of MBA Semester IV during the academic year 2012-14. Faculty Guide: Prof. Falguni Pandya Date: 21/02/2014 Head of Department: Dr. Naresh Patel Date:21/02/2014 Preface Practical knowledge by way of research is a step to bride up the gap between the theoretical studies of finance and its practicality in the world. Hence D...
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...banking industry in Asia over the last decade. In the large, insular, developing economies of China and India, the reform movement originated with internationalizing and introducing market mechanisms to stimulate previously state-owned systems. In Japan and the other traditionally market oriented Asian economies, the reform was born out of crisis. Japan’s slow and painful, a decade-long recession of the 1990s, following the bursting of the bank-financed real estate and stock markets bubbles, finally led to a consensus on the need for reform. But real urgency did not enter banking reform in Asia until the Asian Financial Crisis struck the smaller, developing, market-based economies of Asia in 1997. In the run-up to the crisis, capital inflows helped fuel debt-financed investment, while stable exchange rates and surging economic growth masked the risks of many loans to leveraged and risky companies, often based more on connections than sound credit analysis. Many banks were profitable notwithstanding corruption, poor control and lax banking practices. In mid 1997, investor sentiment turned against the region, precipitating a drop in asset values, an exodus of capital, consequent pressure on local currencies, abandoning of pegged exchange rates and rapidly rising interest rates precipitating recessions. Corporate bankruptcies increased, severely...
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...Secular Stagnation: Facts, Causes and Cures Edited by Coen Teulings and Richard Baldwin CEPR Press a A VoxEU.org Book Secular Stagnation: Facts, Causes, and Cures A VoxEU.org eBook Centre for Economic Policy Research (CEPR) Centre for Economic Policy Research 3rd Floor 77 Bastwick Street London, EC1V 3PZ UK Tel: +44 (0)20 7183 8801 Email: cepr@cepr.org Web: www.cepr.org ISBN: 978-1-907142-77-2 © CEPR Press, 2014 Secular Stagnation: Facts, Causes, and Cures A VoxEU.org eBook edited by Coen Teulings and Richard Baldwin CEPR Press abcde Centre for Economic Policy Research (CEPR) The Centre for Economic Policy Research (CEPR) is a network of almost 900 research economists based mostly in European universities. The Centre’s goal is twofold: to promote world-class research, and to get the policy-relevant results into the hands of key decision-makers. CEPR’s guiding principle is ‘Research excellence with policy relevance’. A registered charity since it was founded in 1983, CEPR is independent of all public and private interest groups. It takes no institutional stand on economic policy matters and its core funding comes from its Institutional Members and sales of publications. Because it draws on such a large network of researchers, its output reflects a broad spectrum of individual viewpoints as well as perspectives drawn from civil society. CEPR research may include views on policy, but the Executive Committee of the Centre does not give prior...
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...pResented by the society of ActuARies, the cAsuAlty ActuARiAl society And the cAnAdiAn institute of ActuARies Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications Copyright 2008 by the Society of Actuaries. R I s k M a n a g e M e n T: the current financial crisis, lessons learned and future implications introduction the current financial crisis presents a case study of a “financial tsunami” (as former federal Reserve chairman Alan Greenspan recently called it) on what can go wrong. its ramifications are far-reaching and the lessons learned will be embedded in risk management practices for years to come. As one of the premier enterprise risk professions in practice today, the actuarial profession is sharing its substantial insight into what went wrong and the implications for the future. on behalf of the society of Actuaries, the casualty Actuarial society and the canadian institute of Actuaries, we are pleased to provide a series of essays on Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications. this e-book is the result of a call for essays on the subject coordinated by the following groups: • • • • The Joint Risk Management Section of the Society of Actuaries, Casualty Actuarial Society and Canadian institute of Actuaries The Investment Section of the Society of Actuaries International Network of Actuarial Risk Managers Enterprise Risk Management Institute International ...
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...October 28, 2011 The Efficient-Market Hypothesis and the Financial Crisis Burton G. Malkiel* Abstract The world-wide financial crisis of 2008-2009 has left in its wake severely damaged economies in the United States and Europe. The crisis has also shaken the foundations of modern-day financial theory, which rested on the proposition that our financial markets were basically efficient. Critics have even suggested that the efficient--market–hypotheses (EMH) was in large part, responsible for the crises. This paper argues that the critics of EMH are using a far too restrictive interpretation of what EMH means. EMH does not imply that asset prices are always “correct.” Prices are always wrong, but no one knows for sure if they are too high or too low. EMH does not imply that bubbles in asset prices are impossible nor does it deny that environmental and behavioral factors cannot have profound influences on required rates of return and risk premiums. At its core, EMH implies that arbitrage opportunities for riskless gains do not exist in an *Princeton University. I am indebted to Alan Blinder and to the participants in the Russell Sage Conference on Economic Lessons From the Financial Crisis for extremely helpful comments. 2 efficiently functioning market and if they do appear from time to time that they do not persist. The evidence is clear that this version of EMH is strongly supported by the data. EMH can comfortably coexist with behavior finance, and the insights of Hyman...
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...American University in Bosnia and Herzegovina International Finance and Banking BSAD 120 Principle of Banking GROUP PROJECT Financial Crises: Asia 1997 and Global Recession 2008 Group members: Professor: Vesna Plakalovic Faris Njemcevic Ibrahim Music Avdo Halilovic Sabit Ceho 1. Explain both crises in your own words As for the Asian crisis which has occurred in year 1997/1998 we can say that something that looked really small, and not important has impacted most of the Asian countries but the World as well. As for the crisis beginning, we can say that it has begun in the Thailand. Problems started in the USA where was a lot of loans and credits that lead towards the collapse and bankruptcy of most of the banks and financial institutions in the USA. Looking for the investment and good return of investments, Americans banks and investors have decided that the Middle East and Asian countries are perfect investing area. When American companies started to invest into Asian countries like Thailand ,which has really low GDP and standard of life, big money income into poor countries it has only one possible outcome. GDP in Thailand and other surrounding countries started to appreciate really fast which was almost uncontrollable. Problem was that many experts have noticed and put a warning on ,was that GDP...
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...| Asian Crisis of 1997 | | | Prepared by:Azra Becirovic and Sanela Bilalic | | April 21, 2012 | Long before Asian financial crisis has started, South Korea, Thailand, Indonesia, and Malaysia had an increasing economic performance; economy was fast growing, saving rates were high, and inflation low. Turning point in Asian economy was 2 July 1997, the day when Thai Baht fell around 20 % against the $US. “It all began in Thailand’ summarizes the conventional explanation of the early stages of the crisis.” (Hill, p.3) How it all began, what factors caused the crisis, what segments were affected the most, what was the backup plan, and what policies should have been taken to prevent the crisis are the points that this paper will cover. First and Second-Generation Models According to 1996 annual report of Bank for International Settlements (BIS), pre-crisis fundamentals exhibit economic performance of Asian countries. They’ve experienced moderate inflation rates of about 6%, high savings rate of 32%, and trade openness indicators of 39%. Table 1: East Asian Economic Conditions Before Crisis Although accounting and macroeconomic analytics have failed to foreseen the currency crisis, which is inevitable, first and second-generation models explain us was it due to weakening macroeconomic fundamentals or financial contagion. In accordance to first-generation model developed by Krugman 1979, market-speculative movements, in response to policies, are incompatible...
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... DURING DIFFICULT ECONOMIC CONDITIONS For the Department of Business Innovation and Skills (BIS) John Kitching Robert Blackburn David Smallbone Small Business Research Centre, Kingston University Sarah Dixon School of Management, Bath University June 2009 URN 09/1031 Contents EXECUTIVE SUMMARY i 1. INTRODUCTION, RESEARCH OBJECTIVES AND METHODS 1 2. RESEARCH CONTEXT 1 2.1 Defining Difficult Economic Conditions 1 2.2 The Current Crisis 1 3. ANALYTICAL FRAMEWORK 1 4. THE BUSINESS STRATEGY AND MANAGEMENT LITERATURE 1 4.1 Business Strategy: General Considerations 1 4.2 Strategic Adaptation to Environmental Jolts, Turbulence and Radical Institutional Change 1 4.3 Strategic Adaptation to Recession 1 4.4 Retrenchment Strategies 1 4.5 Investment Strategies 1 4.6 ‘Ambidextrous’ Strategies 1 4.7 Business Size as an Influence on Strategic Adaptation to Difficult Economic Conditions 1 4.8 International Experience 1 5. CONTEMPORARY COMMENTARY ON THE CURRENT CRISIS 1 6. STRATEGIC RESPONSES IN THE RECESSION: DELIBERATIONS FROM A THINK-TANK 1 6.1 Introduction and Objectives 1 6.2 Business Responses in Recession 1 6.2.1 Knowledge Base 1 6.2.2 Unevenness of Recession 1 6.3 Modelling Strategic Change 1 6.3.1 Typologies of Strategic Change 1 6.3.2 Strategic Thinking and Strategic Actions 1 6.4 The Role of Innovation under Recession Conditions 1 6.5 Roles for Public Policy 1 6.5.1 Legitimise Change and...
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...Exchange Rate Innovations 7 Investments in the Stock Market 7 Investments in the Bond Market 8 Foreign Exchange Reserves 9 Structure of Industries 10 The Banking System 10 Monetary Policy / Money Supply Growth 11 Foreign Debt 12 Capital Flight 12 Asian Currency Crisis 13 Philippines before the crisis 13 What caused the Asian Currency Crisis? The effect it had on the Philippines and other countries 13 Looking into the Future 17 Prevention as the Best Form of Management 17 Some Policy Lessons From the Asian Crisis 17 Need for Great Caution About Financial Liberalization and Globalization 17 Manage External Debt Well and Avoid Large Debts 17 Manage and Build Up Foreign Reserves 17 The Need for Capital Controls and a Global Debt Workout System 18 Conclusion: Summary / Comments / Recommendations 19 Works Cited 21 Appendix A 23 Appendix B 24 Appendix C 25 Appendix D 26 Appendix E 27 Appendix F 28 Introduction The Philippines were ceded by Spain to the US in 1898 following the Spanish-American War. They attained their independence in 1946 after being occupied by the Japanese in World War II. The 21-year rule of Ferdinand Marcos ended in 1986 when a widespread popular rebellion forced him into exile. In 1992, the US closed down its last military bases on the islands. A quarter-century-old guerrilla war with Muslim separatists on the island of Mindanao, which...
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...expectations, and the eicacy of the price system in assuring macroeconomic stability. he 2008–2009 recession not only destroyed the professional consensus about the kinds of models required to understand cyclical luctuations but also revived the credit-cycle or asset-bubble explanations of recession that dominated thinking in the nineteenth century and irst half of the twentieth century. hese “market-disorder” views emphasize excessive risk taking in inancial markets and the need for government regulation. he present book argues for the alternative “monetary-disorder” view of recessions. A review of cyclical instability over the last two centuries places the 2008–2009 recession in the monetary-disorder tradition, which focuses on the monetary instability created by central banks rather than on a boom-bust cycle in inancial markets. Robert L. Hetzel is Senior Economist and Research Advisor in the Research Department of the Federal Reserve Bank of Richmond, where he participates in debates over monetary policy and prepares the bank’s president for meetings of the Federal Open Market Committee. Dr. Hetzel’s research on monetary policy and the history of central banking has appeared in publications such as the Journal of Money, Credit, and Banking; the Journal of Monetary Economics; the Monetary and Economics Studies series of the Bank of Japan; and the CarnegieRochester Conference Series. His writings provided one of the catalysts for the congressional hearings and Treasury...
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...Sixth Edition INTERNATIONAL FINANCIAL MANAGEMENT Cheol S. Eun Bruce G. Resnick International Financial Management Sixth Edition The McGraw-Hill/Irwin Series in Finance, Insurance, and Real Estate Stephen A. Ross Franco Modigliani Professor of Finance and Economics Sloan School of Management Massachusetts Institute of Technology Consulting Editor FINANCIAL MANAGEMENT Adair Excel Applications for Corporate Finance First Edition Block, Hirt, and Danielsen Foundations of Financial Management Fourteenth Edition Brealey, Myers, and Allen Principles of Corporate Finance Tenth Edition Brealey, Myers, and Allen Principles of Corporate Finance, Concise Second Edition Brealey, Myers, and Marcus Fundamentals of Corporate Finance Sixth Edition Brooks FinGame Online 5.0 Bruner Case Studies in Finance: Managing for Corporate Value Creation Sixth Edition Chew The New Corporate Finance: Where Theory Meets Practice Third Edition Cornett, Adair, and Nofsinger Finance: Applications and Theory First Edition Cornett, Adair, and Nofsinger Finance: M Book First Edition DeMello Cases in Finance Second Edition Grinblatt (editor) Stephen A. Ross, Mentor: Influence through Generations Grinblatt and Titman Financial Markets and Corporate Strategy Second Edition Higgins Analysis for Financial Management Ninth Edition Kellison Theory of Interest Third Edition Kester, Ruback, and Tufano Case Problems in Finance Twelfth Edition Ross, Westerfield, and Jaffe Corporate Finance Ninth Edition...
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