Historical Analysis And Prevention Strategies In Financial Crises

Financial systems have an important function in terms of developing the economy. Institutions operating in the financial field and investment instruments contribute to the best conversion of the savings created. Financial institutions operate within the supply-demand balance in terms of bringing savings to the economy in the most accurate way. When it continues in a qualified way, it will be fully provided in the economic order in general. It can be possible if financial activities are similar to real economic conditions both quantitatively and qualitatively. Financial institutions and instruments need to be linked to the economic realities of the world and other regions. Indicators can show themselves in a qualified way when there is a regular relationship between financial institutions and the general economic situation. If financial institutions continue to operate, but if there are significant losses in the real economy and if the economic indicators in general are bad, there is a problem here.

It is a very natural process to experience losses as well as gaining returns. Although the losses inherent in investment are price drops, this decline progresses to a certain extent. A continuous decline in any financial institution or investment instrument may indicate the existence of a crisis. Crises often occur when financial regulations and changes are not implemented properly. Many economic indicators appear to be significantly negative. Institutions and individuals are significantly affected. However, it is basically institutions and people that cause financial crises. Crises can arise because financially operating institutions are not well regulated and people misbehave in terms of investment. Apart from these, there may be negativities or different problems emerging on a global scale. Even if financial crises occur, it is possible to overcome these crises in a short time and change their effects.

How Do Financial Crises Occur?

Financial crises do not occur in a very short time in the region where they occur. There is the beginning of a crisis and a process of development. We can divide the financial crises into two groups, either as a result of economic mistakes or as a result of the general course of the world. Crises occur because countries make important mistakes in financial management. When there is a financial crisis in different parts of the world, the level of impact of countries differs from each other. It reveals that the economic and financial structure shows significant changes in different countries. A country’s important work on finance and risk management will be an important protective factor for crises. Developing deep-rooted rules and constantly working to improve the economic structure can significantly reduce the impact.

Even if financial crises occur, solutions can be found in a short time without significant problems thanks to a strong economic indicator. It is not easy to achieve this situation due to the constant deterioration of economic indicators and the presence of non-transparent financial institutions. Due to the existence of very significant problems in the financial sense, a high level of exposure may arise from the crises experienced all over the world. Significant losses may occur due to currency crises or collapses. The emergence of currency-related crises and their long duration may cause serious loss of national income. From a historical point of view, it will be seen that the banking crises and the collapses in the field of finance are more corrosive in terms of loss of national income. We can see that the resulting losses are almost 2 times higher than the losses due to currencies. We can see that the studies and changes to be made in the field of banking are very important.

Why Is Historical Analysis Important In Financial Crises?

The best remedies may include uncovering previous experiences. There are many different crises experienced in the world so far. It is very important what kind of method a country or state follows at the point of crisis and what solutions it uses. When historical analysis is made in the sense of financial crises, mistakes and mistakes are prevented. For a state, historical analysis prevents repeating mistakes made in previous crises. It will also provide significant advantages in determining the measures to be taken and the strategies to be followed. Reading and analyzing financial crises from a historical perspective will make important contributions.

It would be right to find expert and experienced teams. A state’s analysis based on scientific foundations after the crisis it has experienced will result in a significant gain in preventing future crises. While making historical analysis, the characteristics of the financial structure and the basic structure of the current economy should be revealed. How financial institutions work and what regulations are made are among the important outputs. With the historical analysis, many new arrangements can be made, especially in terms of financial institutions and the real economy. Being able to determine which economic indicator is most effective is important in terms of showing the missing aspects of a state.

Financial Crises Prevention Strategies

It is among the dangerous problems that many states have faced before and are likely to encounter again. Developing new methods to manage the crises and prevent the crisis that may arise later is the basic way to be followed. At the point of understanding financial crises, primarily understanding the new financial structure created in the world and analyzing the expected risks all over the world will provide a significant gain. New strategies should be developed by working on the players playing a role and the main risks that arise. Preliminary studies should be carried out on how the global crises will affect the economic indicators, especially since they have profound effects on the external debt in global markets and in global markets. New legal regulations in the financial field may be needed in the strategies to be put forward. Improving the law to make new regulations is among the important factors that will facilitate reform in a region.

Financial crises occur at the level of states as well as at the level of companies and investors. Many investors suffer significant losses due to a financial crisis. Even if companies and investors have sufficient skills in risk management, these problems can be easily avoided. The basic behavior of the company and the investor is an important factor. Previous studies to manage crises and risks come to the fore at the point of preventing losses.

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Anil UZUN