Future Financial Crises Research Articles

The Public Health Implications of the Global Financial Crisis

The Global Financial Crisis resulted in significant economic problems that subsequently led to a public health crisis worldwide. For example, the unemployed suffered from more severe physical and mental health problems than the employed due to the loss of employer-sponsored health insurances. The crisis further exacerbated racial health inequalities that subsequently worsened maternal and child health outcomes, which negatively affected health status of the future generations. This paper provides a comprehensive discussion of the influence that this crisis has had on physical and mental health, health inequalities, and the intergenerational health impact. To respond to the health implications, the government implemented the Affordable Care Act and the Continuation of Health Coverage (CORBA). In the future, policymakers need to increase social safety net programs, especially government health insurance, for vulnerable populations so that another global financial crisis will likely not have such a negative and profound impact on public health outcomes. The motivation of this paper is to emphasize that higher-quality and more comprehensive unemployment health insurance that covers a broader and more diverse set of populations should become available for the unemployed during economic downturns. This article concludes that policymakers need to design health policies in a way that prevents future financial crises from depriving low-income and unemployed people of their right to health care. Policies must become proactive in advocating for health equity and creating opportunities for people to access medical services in a timelier manner, especially during times of financial downturns.

Social media-based implosion of Silicon Valley Bank and its domino effect on bank stock indices: evidence from advanced machine and deep learning algorithms

Social media-driven speculations play a crucial role in triggering the collapse of the banking system and stock markets. In this paper, we investigate the effect of Twitter-based investor sentiment on the collapse of Silicon Valley Bank (SVB), the 16th largest bank in the US. Additionally, we examine the spillover effect of the social media-based investor sentiment and SVB collapse on the bank stock indices from twelve countries where Global Systemically Important Banks (G-SIBs) operate. Advanced machine and deep learning models are employed to model the social media-based investors’ sentiment regarding SVB implosion and its spillover effect on the G-SIBs’ bank stock indices. Our results reveal that social media-based negative investors’ sentiment played an important role in SVB implosion. Our results further show that the negative investors’ sentiment persisted, and its systemic shock was transmitted to the G-SIBs bank stock indices. Importantly, our results provide a lead and lag relationship between investors’ sentiment and returns of G-SIBs bank stock indices. The findings of this study offer crucial insights for policymakers to consider the external shocks associated with social media-based investors’ sentiment when devising policies related to bank runs, thus helping to prevent future financial crises and cross-border contagion.

Production networks and resilience: How dense production networks shield economies in financial crisis.

The research delves into the underexplored area of how production network structures influence the severity of economic downturns, particularly during the last financial crisis. Utilizing the RSTAN database from the OECD, we meticulously derived critical measures from the input-output matrices for 61 economies. Our methodology entailed a panel analysis spanning from 2008 to 2010, which is a period marked by significant recessionary pressures. This analysis aimed to correlate economic performance with various production network metrics, taking into account control factors such as interest rates and the prevalence of service sectors. The findings reveal a noteworthy positive correlation between the density of production networks and economic resilience during the crisis, which remained consistent across multiple model specifications. Conversely, as anticipated, higher interest rates were linked to poorer economic performance, highlighting the critical interplay between monetary policy and economic outcomes during periods of financial instability. Given these insights, we propose a policy recommendation emphasizing the strategic enhancement of production network density as a potential buffer against economic downturns. This approach suggests that policymakers should consider the structural aspects of production networks in designing economic stability and growth strategies, thus potentially mitigating the impacts of future financial crises.

An Study on the Causes and Consequences of the SVB Collapse

This comprehensive study delves into the nuanced causes and repercussions surrounding the failure of Silicon Valley Banks(SVB), scrutinizing both external and internal factors. Internally, the demise is attributed to mismanagement of assets and liabilities, coupled with flaws in the business model. Externally, the Federal Reserve’s interest rate hike and relaxed financial regulations during the Trump era are identified as pivotal triggers. Post-bankruptcy, the rapid acquisition and sale of SVB, First Total Bank, and Signature Bank temporarily alleviate risks within the US banking sector. Regulatory authorities respond by fortifying rules, enhancing industry resilience but simultaneously tightening loan conditions, potentially intensifying economic downturn pressures. Presently, market confidence is on the mend due to regulatory influence, limiting systemic risks. However, the looming 2023 interest rate hike poses a threat, particularly with tight monetary policies. Small and medium-sized US banks, heavily invested in commercial real estate, face heightened vulnerability, potentially precipitating a downward spiral in property prices. Drawing lessons from Lehman Brothers, the study advocates for a balanced approach to monetary policy, emphasizing financial stability, improved risk management by regulators, and ongoing efforts to avert and mitigate future financial crises.

Jellyfish Search Algorithm Based Feature Selection with Optimal Deep Learning for Predicting Financial Crises in the Economy and Society

The financial crises has emphasized the part of financial relationship as a potential source of macroeconomic variability and systemic risk worldwide. Predicting financial crises using deep learning (DL) infers leveraging neural network (NN) to identify patterns indicative of future financial crisis and analyse complicated financial data. DL approaches such as recurrent neural network (RNN) or long short-term memory (LSTM) that process a massive quantity of past financial data such as geopolitical events, economic indicators, and market prices. These models target to identify refined connections and signals that can lead to an economic recession by learning from earlier crisis and their precursors. The problem resides in the complex and dynamic nature of financial market, demanding continuous training and modification of methods to retain significance in the aspect of developing financial condition. Although DL shows the potential to increase prediction capabilities, it's vital to accept the inherent ambiguity in financial market and the requirement for cutting-edge development of models to enhance their accuracy and reliability. This study proposes a jellyfish search algorithm based feature selection with optimum deep learning algorithm (JSAFS-ODL) for financial crisis prediction (FCP). The objective of JSAFS-ODL technique is classified the presence of financial crises or non-financial crises. To accomplish this, the JSAFS-ODL technique applies JSA based feature selection (JSA-FS) to choose an optimum set of features. Besides, RNN-GRU model can be used for the FCP. For enhancing the detection results of the RNN-GRU approach, chimp optimization algorithm (COA) can be utilized for the optimal tuning of the hyperparameters correlated to the RNN-GRU model. To guarantee the better performance of the JSAFS-ODL procedure, a series of tests were involved. The obtained values highlighted that the JSAFS-ODL technique reaches significant performance of the JSAFS-ODL technique.

Global Financial Crisis: Causes and Reactions

This paper examines the reasons behind the financial crisis of 2008, its effects, and the subsequent developments. At that time, the federal government's monetary policy promoted subprime loans, and credit default swaps were derived based on subprime loans. This series of reasons led to a huge bubble in the real estate market and directly caused the subprime mortgage crisis. Companies are closing one after another, unemployment and inflation are rising, and people's lives are getting more complex. To survive this crisis, the government passed pertinent legislation to support economic growth, and banking regulators corrected these laws to stop a repeat of the subprime mortgage crisis. Nowadays, the outbreak of the COVID-19 epidemic and the conflict in Ukraine have brought the world economy into trouble again. As a result, the 2008 financial crisis study is crucial to understanding modern society because it can be used to prevent future financial crises and effectively address economic problems.

COVID-19-related disclosures by listed firms in Vietnam

Purpose This paper aims to measure the COVID-19-related disclosure extent of listed firms in Vietnam and its associated factors. Design/methodology/approach The authors apply a previously developed reporting framework to evaluate the disclosures of 100 listed firms with the largest market capitalization on the Hanoi and Ho Chi Minh stock exchanges as of 31 December 2021. The disclosures were from integrated reports, annual reports, corporate governance reports and financial statements. The authors then used a regression model to examine the factors that influenced the disclosures, such as corporate governance, ownership concentration and firm profiles. Findings The research results reveal that the extent of COVID-19-related disclosure in Vietnam is relatively low. It also finds that the audit committee, firm size, age and industry are positively associated with the extent of COVID-19-related disclosure. Originality/value To the best of the authors’ knowledge, this study is the first to examine COVID-19-related disclosures of listed companies in Vietnam and their determinants. It contributes significantly to the empirical evidence in this field. The findings of this study can help corporate managers and policymakers to improve information disclosure practices during future financial crises.

The Global Financial Crisis and Its Impact on Banking Risk Management

This paper explores the significance of researching the financial collapse in light of the present pandemic and the uncertain economic climate of the Russian-Ukrainian conflict. This paper examines the causes, methods, and repercussions of the most significant financial crisis of 2008 as the focus of our study. This raises the question of whether there is a need for more regulation of the banking industry in order to enhance its ability to respond to future financial crises. Unrestricted lending policies and blind economic expansion strategies have been found to expose financial institutions to larger dangers. The examination of the three regulatory agreements demonstrates that the importance of a robust regulatory framework to increase the financial system's stability cannot be overstated. While the global onset of a financial crisis is a low-probability event, it is of the utmost importance that the regulation of financial institutions constantly adapts to new difficulties and uncertainties in light of shifting economic and geopolitical conditions.

What’s Left in Your List? An Analysis of Business Database Holdings, Funding Sources, Cancelations, and the Impact of COVID-19 at Top Ranking U.S. Universities

Business and economics related databases and data sets are the most vital resources for supporting scholarly research and the curriculum at colleges and schools of business, and these resources evolve rapidly and are subject to significant price fluctuations. In this study, the top-ranking U.S. universities according to the U.S. News and World Report with Association to Advance Collegiate Schools of Business (AACSB) accreditation were surveyed about their subscriptions to databases, WRDS data sets, and Bloomberg Terminals to create a benchmark. In this survey, these institutions were also asked to provide information about funding source or cost-sharing changes and cancelations brought forth by budgetary pressures from COVID-19. The intent was to provide a snapshot of the impact of COVID-19 but to also provide guidance to institutions facing similar budgetary pressures in a future financial crisis.

Drivers and risk factors of German local financial sustainability focusing on adjusted income

Analysing the financial sustainability of local governments is of great interest, as they offer a wide range of services and are close to citizens. Various organizations have pointed out the need to analyse the determinants of financial sustainability, and recent research has focused on several European countries, using adjusted income as a dependent variable. To fill the research gap in the context of German local governments, we conduct an empirical analysis with 5 years of data from 363 local governments from North Rhine–Westphalia to analyse the impact of socio-demographic and financial-economic factors on financial sustainability, focusing on the adjusted income. Our results indicate that financial sustainability is influenced by factors on which the local governments have no impact or at least only a limited impact. Specifically, the debt level and the level of population are identified as risk factors, whereas own taxes, rate support grants and the net cash surplus serve as drivers of financial sustainability. Points for practitioners Understanding the determinants of financial sustainability is important for politicians and public managers in order to improve their risk management and decision-making processes and to prevent future sustainability problems. This paper identifies several socio-demographic and financial-economic determinants of FS, on which the local governments have only a limited impact. Considering that the financial sustainability of German local governments in North Rhine–Westphalia largely depends on external factors might be of great interest for policymakers with regard to future financial crises.

Heterogeneous effects of macroprudential policies on firm leverage and value

We empirically investigate the effect of financial institution-targeted macroprudential policies on firms using a comprehensive macroprudential policy dataset and corporate panel data across 35 countries. We find that tightening of macroprudential measures persistently curbs the leverage of firms, while loosening is related to the increase in leverage. We also find that this effect on leverage is heterogeneous across firms, as net macroprudential policy actions reduce the procyclicality of leverage more significantly for small firms and firms with high leverage. Also, we estimate the effect of macroprudential policies on firm value to evaluate potential policy trade-offs as the policies restrict the firms' access to credit during economic booms while protecting them from future financial crises. The effect of macroprudential policies on firm value is generally positive despite the policies' restrictive nature. Further, the effect on firm value is heterogeneous depending on firm characteristics: the positive effect becomes stronger as firms are less leveraged, but this positive effect is weaker for firms that grow faster, suggesting potential costs of macroprudential policies for these firms.

CONTEMPORARY RISKS FACING THE GLOBAL ECONOMY

The articles dispute, that it is important to investigate the financial stagnation and chaotic situation that led to the crises in the international financial markets, and to highlight these consequences and reduce their percentage. It becomes a part of life by ensuring that future financial crises are affected as much as possible, and the world’s population suffers from unemployment there, the production process weakens, it becomes difficult to find the needs of the population, and this situation is increasing to chaotic. To avoid global financial crises, the study and research of past financial crises should not be repeated as much as possible. Consequently, this article plays the role of being one of the helper seeing these errors. Purpose: To study the financial crises that occurred in the financial markets is to prevent the repetition of those mistakes during the crises that may occur in the future. Methodology: Induction, deduction and analysis methods were used in the research work. The result of the study: It was determined that the crises in the financial markets. It happened due to the thoughtless, unexamined implementation of the activities that caused their beginning as the cause of occurrence. Crises are mainly caused by the fact that what some people do instinctively is sometimes wrong. In order to prevent this, increasing people’s financial knowledge is informing them of the wrong activities that happened in the past, and showing them the way out of these crises.

The Need for Stricter Regulations to Prevent the Future Financial Crisis

The Need for Stricter Regulations to Prevent the Future Financial Crisis

Kazakhstan: the compliance of Banking Law, part of islamic banking with the Shariah principles and rules

The Kazakhstan government was from first country in the central Asia and post-soviet countries took initiation for amending the legislation to introduce Islamic Banking in the country. For this reason, the government of Kazakhstan decided to promote Islamic Banking in the country therefore, it introduced amendments into the existing legislation. The aims of this study were to analyze and find out the compliancy of Kazakhstan Banking law, part of Islamic banking to the Shariah Standard of AAOIFI. Islamic banking sector is in the beginning of its development and growth, hence the government of Kazakhstan and banking system regulatory authority have to focus to build a competitive financing sector that to be attractive more for Islamic finance companies, not only two by financial institutions, and to promote attraction of investment and financing into real economy sector development of Kazakhstan through Islamic banking and financing. The reason for introducing Islamic banking is to reduce any future financial crises and to create stable economic system. Keywords: Banking, Law, Compliance, Legislation, Regulation.&nbsp

The Great Game Will Never End: Why the Global Financial Crisis Is Bound to Be Repeated

This article re-examines key explanations of the Global Financial Crisis—product complexity, behavioural biases in decision making, systemic risk, and regulatory arbitrage and capture—and finds a common underlying cause, namely gaming by personnel at all levels in the banking sector and its regulators. This has enabled banks to use highly leveraged, maturity-mismatched investment strategies, which were designed so that the banks retained the upside rewards, but transferred the downside risks to taxpayers, leading to the privatization of profits and the socialization of losses—behaviour that has been described as ‘banksterism’. Although governments have introduced some significant mitigatory measures, they will not be effective in preventing future financial crises, because they do not and, indeed, cannot provide the appropriate incentives to end the Great Game between bankers and taxpayers, which would involve making bankers, rather than taxpayers, personally liable for losses.

Corporate Governance and Financial Crisis - A Empirical Study of Taiwanese Listed Companies

Abstract This study mainly examines the association between corporate governance and financial crises of firms cross-listed in Taiwan. Using Logistic regression analysis, it takes Taiwan listed companies and the firms cross-listed in Taiwan from 2009 to 2019 as the research objects, to discuss corporate governance and corporate financial crisis and predict the possibility of the company’s future financial crisis. The empirical results reveal that the corporate governance mechanism of the firms cross-listed in Taiwan had no significant correlation between the change of financial controller and the future financial crisis of accounting firm and the possibility, while the number of internal audit changes, the shareholding ratio of major shareholders, and the size of the company were positively correlated with the possibility of future financial crisis. The results of this audit confirm that the corporate governance mechanism of the first listed company has an important influence on the management and the operating performance of the company. It may also serve as a basis for external investors and the government to judge the financial soundness of the first listed company. JEL classification numbers: G32. Keywords: Corporate governance, Financial crisis, Majority shareholding.

The effect of COVID-19 on Indian stock market volatility: can economic package control the uncertainty?

PurposeThe stock market has shown fluctuating degrees of volatility because of the recent COVID-19 pandemic in India. The present research aims to investigate the effect of the COVID-19 on the stock market volatility, and whether the economic package can control the market volatility or not, measured by a set of certain sector-level economic features and factors such as resilience variables.Design/methodology/approachWe examine the correlation matrix, basic volatility model and robustness tests to determine the sector-level economic features and macroeconomic factors helpful in diminishing the volatility rising because of the COVID-19.FindingsThe outcomes of this study are significant as policymakers and financial analysts can apply these economic factors to set policy replies to handle the unexpected fluctuation in the stock market in sequence to circumvent any thinkable future financial crisis.Originality/valueThe originality of the paper is to measure the variables affecting the stock market volatility due to COVID-19, and understand the impact of capital market macroeconomic variables and dummy variables to theoretically explain the COVID-19 impact on stock market volatility.

Revisiting the Missing Link: An Ecological Theory of Money for a Regenerative Economy

Money is critical for a regenerative future. Transforming it is an unavoidable social, political, and economic endeavor that must be a global priority if we are to prevent future financial crises, reduce economic inequality and adhere to our climate agreements and sustainability goals. For this transition to occur, we urgently need new economic and monetary paradigms that address the root causes of our current unsustainability, offer a new monetary ontology and design, and, more importantly, steer our monetary regime towards the regeneration of our social, economic and ecological landscapes. We need an ecological understanding of money grounded in Ecological Economics and an Ecological Value Theory that lays down the foundations for the conscious democratization, decentralization, and diversification of money. In this work, we revisit and update the missing link between money and sustainability by proposing new ontological avenues and reviewing the design elements and degenerative processes built into the existing system. We also contribute to the development and emergence of an Ecological Monetary Economics by systematizing the ongoing monetary transition toward sustainability and by offering a set of principles drawn from the regenerative economics literature for the conscious design of monetary ecosystems that contribute positively to solving our societal challenges of the 21st century.

Impact of financial stress in advanced and emerging economies

PurposeThe purpose of the paper is to examine the differences in the impact of financial stress in advanced and emerging economies.Design/methodology/approachThe authors employ a panel vector autoregression model (PVAR) for a comparative analysis of the relationship between financial stress, economic growth and monetary stability in 14 advanced and emerging economies. A homogeneous measure of financial stress is constructed and measured as an index that provides signals of stress episodes in an economy.FindingsThe impact of financial stress shocks is greater on the economic growth of advanced economies; likewise, financial stress shocks are significant only in advanced economies. The interbank interest rate is negatively affected by financial stress in emerging economies. In general, the results show a clear view of the importance of financial stability and the economic relevance of financial stress measures in the context of macro-prudential regulation.Originality/valueThe results can be extended to monetary policy to implement measures that mitigate the impact of future financial crises.

Financial Crises and Shadow Banks: A Quantitative Analysis

Motivated by the build-up of shadow bank leverage prior to the Great Recession, I develop a nonlinear macroeconomic model that features excessive leverage accumulation and show how this can cause a bank run. Introducing risk-shifting incentives to account for fluctuations in shadow bank leverage, I use the model to illustrate that extensive leverage makes the shadow banking system runnable, thereby raising the vulnerability of the economy to future financial crises. The model is taken to U.S. data with the objective of estimating the probability of a run in the years preceding the financial crisis of 2007-2008. According to the model, the estimated risk of a bank run was already considerable in 2004 and kept increasing due to the upsurge in leverage. I show that levying a leverage tax on shadow banks would have substantially lowered the probability of a bank run. Finally, I present reduced-form evidence that supports the tight link between leverage and the possibility of financial crises.