Financial crisis

Part of a series on
Macroeconomics
Basic concepts Aggregate demand Aggregate supply Business cycle CAGR Deflation Demand shock Disinflation Effective demand Expectations Adaptive Rational Financial crisis Growth Inflation Demand-pull Cost-push Interest rate Investment Liquidity trap Measures of national income and output GDP GNI NNI Microfoundations Money Endogenous Money creation Demand for money Liquidity preference Money supply National accounts SNA Nominal rigidity Price level Recession Shrinkflation Stagflation Supply shock Saving Unemployment
Policies Fiscal Monetary Commercial Central bank Universal basic income
Models IS–LM AD–AS Keynesian cross Multiplier Accelerator Phillips curve Arrow–Debreu Harrod–DomarНмиф Solow–Swan Ramsey–Cass–Koopmans Overlapping generations General equilibrium DSGE Endogenous growth Matching theory Mundell–Fleming Overshooting NAIRU
Related fields Econometrics Economic statistics Monetary economics Development economics International economics
Schools Mainstream Keynesian Neo- New Monetarism New classical Real business-cycle theory Stockholm Supply-side New neoclassical synthesis Saltwater and freshwater Heterodox Austrian Chartalism Modern monetary theory Ecological Post-Keynesian Circuitism Disequilibrium Marxian Market monetarism
People François Quesnay Adam Smith Thomas Robert Malthus Karl Marx Léon Walras Knut Wicksell Irving Fisher Wesley Clair Mitchell John Maynard Keynes Alvin Hansen Michał Kalecki Gunnar Myrdal Simon Kuznets Joan Robinson Friedrich Hayek John Hicks Richard Stone Hyman Minsky Milton Friedman Paul Samuelson Lawrence Klein Edmund Phelps Robert Lucas Jr. Edward C. Prescott Peter Diamond William Nordhaus Joseph Stiglitz Thomas J. Sargent Paul Krugman N. Gregory Mankiw
See also Macroeconomic model Publications in macroeconomics Economics Applied Microeconomics Political economy Mathematical economics
Money portal Business portal
v t e

A financial crisis is any of a broad 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.^[1][2] Financial crises directly result in a loss of paper wealth but do not necessarily result in significant changes in the real economy (for example, the crisis resulting from the famous tulip mania bubble in the 17th century).

Many economists have offered theories about how financial crises develop and how they could be prevented. There is little consensus and financial crises continue to occur from time to time. It is apparent however that a consistent feature of both economic (and other applied finance disciplines) is the obvious inability to predict and avert financial crises.^[3] This realization raises the question as to what is known and also capable of being known (i.e. the epistemology) within economics and applied finance. It has been argued that the assumptions of unique, well-defined causal chains being present in economic thinking, models and data, could, in part, explain why financial crises are often inherent and unavoidable.^[4]