Question

What are the four causes of financial crisis?

Answer 1

though major 2 or 3 causes are being blamed for the 2008-09 financial crisis, there were various other causes attached to each major cause. some of them are as follows-

1- leverage- its the central cause of all banking crisis.

2-lequidity- mismatch of lequidity that is lending long and borrowing short is another cause,

3_policy failure- interest rate too low for too long

4)financial market failure- stability breeds instability, irrational behaviour among agents

5-structural changes in the global economy- Economic imbalances including global savings glut and low real interest rates

6- ratings agencies-the ratings by the credit rating agencies are also really responsible for the failure of the financial system.