Financial Crises
Financial Crises
The term “financial crisis” is defined as “a wider range of disturbances, such as sharp declines in asset prices, failures of large financial intermediaries, or disruption in foreign exchange markets” (De Bonis et al., 1999). Allen and Snyder (2009) are synthetizing the characteristics of the crisis. They consider that “crisis” is perceived as a serious impact on the real economy, including employment, production, and purchasing power, along with the possibility that great numbers of households and firms or even governments are unable to meet their obligations (insolvency). An example of a “vicious cycle” may start from a money-liquidity crisis at some banks, which extends to an international crisis of investor confidence in the financial sector, leading to a balance of payments problem for the country and currency devaluation, that, therefore, generates even further liquidity problems and, further on, solvency crises for the banks.