Financial Crisis Research Articles

Bank–firm relationships and the value of cash: Evidence from the financial crisis in Japan

Bank–firm relationships and the value of cash: Evidence from the financial crisis in Japan

Climate and environmental impacts of green recovery: Evidence from the financial crisis

Climate and environmental impacts of green recovery: Evidence from the financial crisis

Achieving adult status in Greece in the aftermath of the global financial crisis.

Achieving adult status in Greece in the aftermath of the global financial crisis.

Is Monetary Policy Maintaining Price Stability in India? An Empirical Investigation

The purpose of this study is to empirically investigate whether monetary policy maintains price stability over the long-run and short-run in India. The study uses annual time series data for the period 2001–2022 and applies the autoregressive distributed lag model (ARDL). In the study, the consumer price index is a dependent variable and is used as a proxy measure of price stability, while the cash reserve ratio, statutory liquidity ratio, bank rate, reverse repo rate and repo rate are independent variables. Moreover, the Chow test is employed to detect structural breaks. The results show no structural change attributable to the financial crisis in 2008 and the COVID-19 epidemic in 2020. The results of the bounds test reveal that selected variables have long-run relationships. The empirical findings of the study show that monetary policy maintains price stability in India in both the long-run and short-run. The study recommends the Reserve Bank of India employ a non-accommodative monetary policy to maintain price stability and focus on the repo rate as it has a robust and long-run impact on inflation in India.

Why (and How) to Give Uncertainty its Due

ABSTRACT We live in a world of uncertainty. Amar Bhidé’s book, Uncertainty and Enterprise: Venturing Beyond the Known, does an enormous service in bringing the topic to the forefront. What are we uncertain about? Principally, about the future – we don’t know what will happen. We may not even know the range of possibilities, much less the associated probabilities. But even our construction of the past and present is often uncertain. We construct narratives regarding what happened and why, based on our present understanding of what is so—an understanding that is often significantly incomplete and subject to revision. Even the description of what happened will differ depending on the underlying causal narrative, something that affects our understanding—and planning—going forward. Why haven’t we thought more about uncertainty? Attempts to be more realistic about human behavior than the orthodox rationality paradigm could have taken uncertainty and reactions thereto, more into account; instead, the dominant focus has been on mistakes humans make, “irrationality.” Reality is straightforward—people are just getting it wrong. But reality isn’t that straightforward—again, we live in a world of uncertainty. In my book with my colleague Richard Painter on bankers’ behavior in the years leading up to the 2008 financial crisis, we detailed why bankers had behaved as they did, given the world as it reasonably, and rationally, seemed to them, in a world of uncertainty, where they sought to maximize their employers’ well-being and their own, and there were no sufficiently agreed-upon ways to assess probabilities—at least not until it was too late. Lawmakers, regulators, and policymakers will continue to be ill-served if they do not do a better job of taking uncertainty into account.

The non-bank lending channel: an important substitute for SME bank debt

PurposePost-global financial crisis (GFC), contraction in bank lending to small and medium-sized enterprises (SMEs) created a market opportunity for non-bank lenders. Despite the consequential global growth of SME non-bank debt, little is known about the characteristics of firms that use non-bank debt. Using a database on access to finance in the post GFC period, this paper identifies the characteristics of SMEs that apply for and use non-bank debt.Design/methodology/approachThe non-bank debt lending of 1,683 Irish SMEs post GFC is described. A probit model is estimated to characterise firms that obtained non-bank debt using a three-stage modelling procedure, corrected for selection biases based on firm decisions to apply for bank debt and/or alternative finance.FindingsNon-bank debt is found to be a substitute for bank debt and is used by bank-rejected, bank-discouraged, self-discouraged and very young firms. This suggests some market segmentation with non-bank lending reducing SME funding gaps. Inconsistent with the financial intermediation literature, findings may reflect increased bank regulation and rationalisation.Practical implicationsNon-bank debt is an important source of finance for bank-rejected and discouraged borrowers. Given this structural change in SME lending, it is important to understand the nature of, and any risks associated with, the non-bank debt sector.Originality/valueThis study uniquely considers all sources of non-bank debt. It builds on other studies to consider the impact of both bank and self-discouragement on the use of non-bank debt.

Fundamental Review of the Trading Book (FRTB): A Deep Dive into US, UK and EU Rulemaking and Implementation

The Fundamental Review of the Trading Book (FRTB) is a comprehensive Basel III framework introduced to overhaul market risk capital requirements during the 2007–2009 financial crisis. The framework includes two main approaches for measuring market risk capital: a more risk-sensitive Internal Models Approach (IMA) for banks that obtain supervisory approval and a revised Standardised Approach (SA) that applies granular risk-weighted sensitivities for all banks. This framework has global significance, and its implementation is underway across major jurisdictions. However, the United States, European Union and United Kingdom have taken somewhat divergent paths and timelines in adopting FRTB, reflecting local regulatory priorities and constraints. This document provides a condensed analysis of FRTB’s framework, comparing US, UK and EU regulatory approaches, methodologies, and model approval processes. It also discusses the anticipated impact on large international banks, including changes in risk-weighted assets and capital requirements. It evaluates whether FRTB’s benefits in risk management and financial stability justify the compliance costs. The findings underscore FRTB’s role in strengthening market risk regulation while highlighting the importance of coordinated implementation and fine-tuning to address industry concerns. Key innovations of FRTB include: desk-level model approvals, a rigorous Profit & Loss Attribution (PLAT) test to ensure model accuracy, a Default Risk Charge (DRC) for jump-to-default risks and capital add-ons for Non-Modellable Risk Factors (NMRFs). Since BCBS finalized FRTB standards (as part of the Basel III “final reforms” in 2017–2019), jurisdictions have moved at different paces to implement them.

Heterogeneous drivers of decarbonization in the global power sector

Abstract The decarbonization of the fossil-intensive power sector is critical for climate mitigation. During the global financial crisis, we find that major countries changed their energy inputs and achieved a rapid low-carbon transition in the global power sector. In this study, we employ two-stage decomposition models to reveal the diverse drivers of the peak-and-decline dynamic in the global CO2 intensity of electricity. We then examine the regional heterogeneous drivers of CO2 intensity from major electricity-producing countries within three income groups. Results show that the global CO2 intensity of electricity has reached its peak and declined by 0.35% per year since 2007. High-income countries consistently reduce the CO2 intensity, while upper- and lower-middle income countries contribute to a reduction of the CO2 intensity until recently. The adoption of renewable energy, phase-out of thermal power, and improvement in energy efficiency supported by pronounced regional allocation effects contribute to the rapid decline in the global CO2 intensity of electricity. This paper reveals breakthroughs in the recent global energy transition and sheds light on future CO2 mitigation pathways in the global power sector.

From financial self-efficacy to financial behaviors: the role of financial advice seeking and stress

PurposePrevious research has demonstrated that financial self-efficacy (FSE) plays a significant role in shaping desirable financial behaviors. However, this relationship might be strengthened or weakened in the presence of financial stress and financial advice seeking during pandemics or similar unexpected events. This research aims to examine the relationship between FSE and financial behaviors under economic uncertainties.Design/methodology/approachThe data used in the study was collected between November 17, 2021 and December 15, 2021, and related to economic, demographic, health and psychological attributes before and during the COVID-19 pandemic. The research employs a theoretical framework integrating the financial help-seeking theory with the stress and coping theory to explore these relationships. A moderated mediation model was used to analyze the relationship between financial behavior and FSE. The technique of structural equation modeling (SEM) using the R-Lavaan package was applied to analyze the moderated mediation framework and hypotheses of this study.FindingsFinancial advice seeking plays different roles in the relationship between FSE and financial behaviors in the presence or absence of financial stress. Consumers are more likely to seek external financial advice to engage in positive financial behaviors when experiencing financial stress. Consumers with higher levels of FSE engaged in more positive financial behaviors. Consumers who have sought financial advice in the past or are actively seeking financial advice are more likely to engage in positive financial behaviors.Originality/valueThis study introduces and justifies a moderated mediation framework to investigate the relationship between FSE and financial behaviors during financial crises. This study has confirmed the relationship between FSE and financial behaviors while considering the roles of financial advice seeking and financial stress during a pandemic. The findings have practical implications for consumers, financial service providers and policymakers in preparing for unexpected financial shocks and enhancing financial resilience.

Examining the economic burden and mental health distress among government school teachers in Sri Lanka: a cross-sectional study

Teachers play a key role in improving education system, yet rising psychological disorders among them, influenced by various social, economic, and workplace pressures, pose challenges. The ongoing financial crisis in Sri Lanka has intensified these pressures, impacting teachers' lifestyles and mental health. This study explores the relationship between the economic crisis and mental health outcomes among teachers in Sri Lankan government schools, aiming to support improvements in the education system. A cross-sectional study was conducted among government school teachers (n = 283) in Sri Lanka, utilizing an online-based, self-administered questionnaire to collect data on general demographics, lifestyle adjustments due to financial strain, and strategies for bridging the income gap among the study participants. The psychometric properties of teachers were assessed using the General Health Questionnaire (GHQ-12), and its factor structure was evaluated through Exploratory Factor Analysis (EFA) and validated by Confirmatory Factor Analysis (CFA). Descriptive statistics, including mean, standard deviation (SD), frequencies, and percentages, were calculated with a 95% confidence interval (CI), and significance was set at p < 0.05. Multivariate regression analysis was also performed to identify predictors of mental distress among participants. Among the respondents (response rate 84.5%), 65% were female, and 24% were aged 25–30. Most participants (82.3%) were married, and approximately 29% had 10 to 15 years of teaching experience. Notably, 81.6% reported that their monthly income was insufficient for their needs, with 77% reducing necessary expenses to manage finances and 77.7% seeking supplementary income. The mean GHQ-12 score was 15.15 (SD ± 8.14, 95% CI), indicating that 33.6% of participants experienced low distress, 13.4% showed psychological distress, and 30.4% reported severe distress. EFA revealed a two-factor structure: Factor 1 (social dysfunction) and Factor 2 (depression and anxiety). Multivariate analysis identified the lack of savings and reducing monthly expenditures as significant predictors of psychological distress. In conclusion, the study found that teachers’ incomes were generally inadequate to meet their monthly expenses, prompting lifestyle modifications that correlated with adverse mental health outcomes. Therefore, interventions aimed at improving teachers' psychological well-being are necessary, and policies addressing the financial challenges faced by teachers in Sri Lanka should be strengthened.

Relevance Of BRICS in the Period of Turbulence

The emergence of BRICS is seen as an important shift towards multipolarity, putting significant pressure on the existing hegemony in multilateral institutions such as IMF, World Bank, and the dollar-dominated monitory system. The inaugural BRIC Summit in 2009 at the Russian Federation came up with focused issues of reform in the global financial structure. Starting with the financial issues of mutual interest, BRICS's objectives have widened over time. It encompasses major global issues such as terrorism, Climate Change, food and energy security, international economic and financial situation, reform of the Bretton Woods institutions, trade protectionism, and hegemonic control of multilateral institutions that were held responsible for the great divide between North and South owing to a critical flaw of the unequal representation of developing countries in the global economy. The opening of the 21st century witnessed a financial crisis, bilateral trade wars, sanctions, unilateral actions, and global inequalities in access to finance, technology, resource mobilization, and trading capacities gave impetus to the rise of BRICS. BRICS have shown their concern about the serious setback to the Global Economy caused by the COVID-19 scenario and the hardships suffered by humanity, which had an impact on the economy. The current research paper is based on secondary source of data collection. This is a subjective investigation that intends to discuss the significance of BRICS in contemporary global society as an initiative of collaboration in the areas of economy and trade, innovation, and strategic cooperation. Its objectives are to broaden, deepen, and intensify cooperation for more sustainable, equitable, and mutually beneficial development. It is an attempt to understand the affirmative role of BRICS Nations, it’s future perspectives, and the role of India in BRICS.

The Impact of Foreign Direct Investment on Exports: A Study of Selected Countries in the CESEE Region

The evolving macroeconomic landscape, shaped by the global financial crisis and the COVID-19 pandemic, poses significant challenges for economies worldwide. However, Central, Eastern, and Southeastern European (CESEE) countries have demonstrated resilience and rapid recovery during crises, driven by a surge in consumption fueled by domestic credit and robust export growth supported by flexible exchange rates and adaptive monetary policies. Prior to EU accession, substantial foreign direct investment (FDI) during privatization and restructuring facilitated knowledge and technology transfers in CESEE economies. This study examines the interplay of exports, real exchange rates, GDP growth, FDI, inflation, domestic credit, and the human development index (HDI) in the CESEE region from 1995 to 2022, covering the transition period, EU accession, and major crises. Employing a panel ARDL model, we account for asymmetric effects of these variables on exports. The results reveal that GDP, FDI, inflation, domestic credit, and HDI significantly and positively influence exports, with HDI and GDP exerting the strongest effects, underscoring the pivotal roles of human capital and economic growth in enhancing export competitiveness. Conversely, real exchange rate depreciation negatively impacts exports, though non-price factors, such as product quality, mitigate this effect. These findings provide a robust basis for targeted policy measures to strengthen economic resilience and export performance in the CESEE region.

Impact of Trade Openness and Exchange Rate Volatility on South Africa’s Industrial Growth: Assessment Using ARDL and SVAR Models

This paper explores the impact of trade openness and exchange rate volatility on South Africa’s industrial growth from 1980 to 2024 through a hybrid econometric framework combining Autoregressive Distributed Lag (ARDL) and Structural Vector Autoregression (SVAR) models. It captures both long-term relationships and short-term economic patterns; the analysis reveals that gross domestic product (GDP) is the most significant and consistent driver of industrial value added (IVAD), while trade openness and currency volatility exert limited standalone effects. Structural shocks, notably the 2008 global financial crisis and the COVID-19 pandemic, had significant negative short-term impacts on industrial performance, highlighting systemic vulnerabilities. Robustness tests, including rolling window ARDL and first-difference GDP estimation, confirm the persistence of these relationships. Impulse response functions and forecast error variance decomposition underscore the transient and moderate influence of external shocks compared with the dominant role of internal macroeconomic fundamentals. These findings indicate that liberalisation and exchange rate flexibility must be embedded within a broader developmental strategy underpinned by institutional strength, resilience building, and sustainability principles. This study provides fresh insights supporting policy frameworks that prioritise domestic industrial capacity, macroeconomic stability, and alignment with Sustainable Development Goal 9—inclusive and sustainable industrialisation.

Economics and Economics Education

This commentary briefly reviews the intellectual history of macroeconomics in an informal way. It analyses mainstream economic theories and points out that they have failed to predict economic and financial crises because modern mainstream economics education is going astray. In response to the current crisis facing economics education, the commentary proposes reconstructing curriculum systems, innovating teaching methods, reforming evaluation systems, reshaping social responsibilities, and localising international experiences.

Bank Loans, Financial Incentives, and the Use of Imported Inputs and Services During the 2008 Financial Crisis

ABSTRACT This study investigates the effects of bank credit, public financial incentives, and tax incentives on the use of imported inputs and services along with the impacts of imported inputs and services on firm-level productivity during the 2008 global financial crisis. The results show that firms that obtained bank credit or benefited from public financial incentives or tax incentives registered a significant average difference in the utilization of imported inputs or services during the crisis compared with those that did not. The results also show that in addition to imported inputs, the use of imported services enhanced productivity during the crisis.

Vested interests? Unions, the gilets jaunes movement and the bases for sustainable solidarity

In the 2010s, in response to the impact of the financial crisis of 2008, anti-establishment, anti-austerity, pro-democracy movements such as Occupy!, the Spanish indignados and, in 2018, the gilets jaunes in France emerged. With the rise of independent unions and new forms of work and organising in the platform economy, the future of unions increasingly depends on their ability to engage with a broader range of social and community-based interests and organisations. The gilets jaunes movement in France, like the indignados in Spain, explicitly rejected any links or joint actions with unions, at least initially and in a formal sense. The gilets jaunes case makes visible the challenges for unions, as institutions embedded and reinforcing the current configuration of capitalism, to represent a more fluid set of interests. On the flipside, the dissipation of these movements also makes visible the challenges for social movements maintaining collective action and solidarity without the leadership and organisation familiar in union organisations, and the meta-collective action frame of shared working-class interests. In this reflection, we revisit the gilets jaunes movement and its significance for building bases of sustainable solidarity at a time of the movement’s attempts to establish lasting forms of solidarity through gaining recognition in representative elections as the Union Syndicale Gilets Jaunes (USGJ).

Modeling stock market crash dynamics using analysis of anti-plane shear deformation of a cracked finite isotropic wedge

This paper introduces a novel approach to modeling stock market crash dynamics by drawing an analogy to the mechanics of anti-plane shear deformation in a cracked finite isotropic wedge. Financial markets under stress exhibit patterns of stress concentration, failure propagation, and systemic breakdown, much like cracked elastic media under mechanical deformation. The main objective of this study is to develop a mathematical model that describes the evolution of financial crises as mechanical fracture processes in elastic media. To this end, the specific objectives are: (1) to establish a formal correspondence between the physical variables of the elastic model and financial indicators of risk and instability; (2) to derive critical conditions for crisis propagation using methods from elasticity theory and fracture mechanics; and (3) to analyze the influence of parameters such as the shear modulus ( ), interpreted as market resilience, on the dynamics of recovery or collapse. This will be achieved by using methods from fracture mechanics and elasticity theory, we derive a framework that captures the spread of financial distress, the collapse of price stability, and the conditions for market recovery. The model provides insights into liquidity crises, systemic risk, and intervention strategies.

Hysteresis Effects on Unemployment Rates: A Comparative Study of the Baltic States Before and After EU Accession

This study examines the hysteresis effects on unemployment rates in the Baltic countries using the RALS-LM unit root test method, based on monthly data from February 2000 to August 2024. It assesses the persistence of unemployment by gender, focusing on both female and male unemployment rates. Additionally, the study provides a detailed evaluation of the hysteresis effects observed on unemployment rates before and after the Baltic countries’ accession to the European Union (EU). The findings show that the unemployment rates in these countries are highly sensitive to long-term structural changes. Structural breaks occurred mainly between 2001 and 2003 before EU accession, while the 2008–2009 Global Financial Crisis and the European Debt Crisis shifted these breaks to the 2007–2010 period. Significant structural changes in total unemployment were observed in Estonia and Lithuania after their EU accession. The results indicate hysteresis effects in Estonia and Latvia, whereas Lithuania shows varying patterns of unemployment persistence. This study highlights the importance of understanding the long-term effects of structural changes and external shocks on labor market dynamics in the Baltic countries.

The emerging system of re-insurance in the EU: beyond negative and positive integration

ABSTRACT Over the years of repeated crises, a system of re-insurance for EU member states has evolved, providing a secondary safety net when disaster strikes. This is an alternative to fiscal centralisation. Re-insurance of member states qualifies the asymmetry hypothesis: positive and negative integration is not a complete distinction. The blockage that according to the asymmetry theorem favours negative integration here becomes a driver of positive integration when facing the threat of financial panic. Market pre-empting integration means that policy-makers, aware of their differences, agree on mutual protection that preserves their differences.

The Impact of Monetary and Fiscal Policies on Financial Markets: Policy Miscalculations and Financial Market Turmoil

This paper research how macroeconomic policy effects financial markets by case analysis of the Federal Reserves quantitative easing tightening policy and the United Kingdom governments Mini-budget policy. This presents a qualitative analysis of how specific policies in two cases affect different financial markets. In analyzing the first case, the discussion primarily centered on the adverse effects of a contraction in money supply and rising interest rates on the stock market, bond market, futures market, and credit market. In the second case, policies such as tax reductions and increased issuance of government bonds dampened the development of the foreign exchange market, stock market, and real estate market, while leading to significant volatility in the bond market. This paper shows how theories explain market responses to unexpected policy changes, providing empirical support for the intersection of macroeconomics and financial market theory. The study refers to the policy impacts of non-traditional financial markets, such as the real estate market and the foreign exchange market.