Question

Explain dynamics of financial crises in advanced economies and in emerging market economies

Answer 1

Dynamics of financial crisis in emerging Markets and developed economies are not similar in nature because there are different factors which are triggering these economic crisis in both the economies.

Causes of financial crisis in emerging markets are as follows-

A. devaluation of emerging market currencies against developed market currency is one of the factor.

B.continuous reporting of fiscal deficit by these markets can also trigger a crisis like situation.

C. Inability to pay the overall debt by these Companies to the institutional organisation can also trigger a crisis.

D. Credit unavailability to these economies can lead to liquidity crunch in this economy is facing a lot of crisis

E. Inappropriate management of the monetary policies.

Crisis can happen in developed economy due to following reasons-

A. Inflation of bubble due to higher Investments.

B. Providing too many fiscal stimulus by the central banks.

C.this developed generally do not have higher growth opportunities so they are also highly prone in adverse economic movements

D.largest number of unemployment in these countries is one of the triggering factors for economic crisis