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Chapter 10: Q.8 (page 283)

Banking crises have occurred throughout the world, like the Finnish banking crisis of 1990s, the 2002 Uruguay banking crisis, and the 2003 Myanmar banking crisis. In this context, what similarity do we find when we look at various different countries?

Short Answer

Expert verified

The main similarity is that the banking crisis leads to business failures.

Step by step solution

01

 Introduction

The finnish baning crisis occured in the 1990s and lasted mostly around 1991-93. The URuguay crisis hit the economy of Uruguay in 2002. The banking crisis of Myanmar hit the economy in 2003.

02

Explanation

.Banking crisis leads to business failure ,because ,At the point when banks looked to safeguard themselves, they quit loaning cash. Organizations couldn't gain admittance to capital, and shut their entryways, tossing a large number of Americans unemployed. Those jobless Americans couldn't continue to spend, and the harmful descending winding proceeded

03

Final Answer

The main similarity is that the banking crisis is mainly affecting businesses. due to the banking crisis, Organizations couldn't gain admittance to capital, and shut their entryways.

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Most popular questions from this chapter

To avoid insolvency, regulators decide to provide the bank with \(27 million in bank capital. Assume that bad news about mortgages is featured in the local newspaper, causing a bank run. As a result, \)40 million in deposits is withdrawn. Show the effects of the capital injection and the bank run on the balance sheet. Was the capital injection enough to stabilize the bank? If the bank regulators decide that the bank needs a capital ratio of 10% to prevent further runs on the bank, how much of an additional capital injection is required to reach a 10% capital ratio?

Go to the St. Louis Federal Reserve FRED database, and find data on the number of commercial banks in the United States in each of the following categories: average assets less than \(100 million (US100NUM), average assets between \)100 million and \(300 million (US13NUM), average assets between \)300 million and \(1 billion (US31NUM), average assets between \)1 billion and \(15 billion (US115NUM), and average assets greater than \)15 billion (USG15NUM). Download the data into a spreadsheet. Calculate the percentage of banks in the smallest (less than \(100 million) and largest (greater than \)15 billion) categories, as a percentage of the total number of banks, for the most recent quarter of data available and for 1990:Q1. What has happened to the proportion of very large banks? What has happened to the proportion of very small banks? What does this say about the 鈥渢oo-big-to-fail鈥� problem and moral hazard?

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