Economic and Financial Crisis. Literature & Language Research Paper

Economic and Financial Crisis
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Economic and Financial Crisis
The economic world has probably learned a few things from past economic and financial crises, the Great Recession of 2008 being a recent one. The crisis came as a result of the governing authorities failing to adequately monitor the mortgage lenders and financial institutions, leading to risky borrowing that eventually led to numerous incidents of defaulting as a result of increased interest rates (Gertler & Gilchrist, 2018). To predict the likelihood of occurrence of a financial crisis, numerous factors need to be taken into consideration, hence a great magnitude of uncertainty. However, the world has learned from previous ordeals and models, and researches on possible indicators of future financial crises have been established.
A critical analysis conducted by the World Economic Forum (WEF) with the help of data from the International Monetary Fund (IMF) was able to establish a probabilistic model that could signal for an impending financial crisis. Credit booms, which are characterized by an upsurge in the prices of assets, rates of investment, and overall growth in Gross Domestic Product (GDP) (Asriyan et al., 2018) together with the increase in the cost of one currency in relation to other foreign currencies are the most common indicators of impending financial crises (Obstfeld, 2015). Also, overborrowing is another indicator that raises the debts levels from moderate to high and eventually leads to financial turmoil, consequently compromising a country's competitiveness (Obstfeld, 2015). The indicators apply both to the developed and the developing countries regardless. Empirical research alike to WEF however, does not put into consideration other factors such as the political, social, and health factors that may influence the emergence of an economic crisis, and therefore the uncertainty prevails.
The 2008 global financial crisis caused a lot of damage including massive job losses and bankruptcy and hence the economic world had to act accordingly. The G20 international economic forum has held numerous summits to deliberate...