What are reliable predictors of economic and financial crisis? Describe some ach

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ANSWER::??Predictors of economic and financial crisis::

Before the catastrophic 2008-09 global financial crisis several clear warning signaled an impending crisis including the credit bubbles and mortgage costs in many nations as well as prominent warning voices of such developments. All financial crises betray underlying weaknesses in financial system or the economy. While the weakness does not necessarily cause the crisis without a triggering event, the spread and extent of the crisis are the outcomes of the weakness. Economic and financial crises often comprises of two components including an underlying vulnerability and a trigger. While the timing and trigger of a crisis are hard to forecast, the underlying vulnerability is always predictable. Macroeconomic predictors generally linked to crises include long low interest rates periods and unprecedented rise in private sector debt. the financial crisis period coupled with unprecedented real credit rise signals risk accumulation and might indicate risk under-pricing. Rise in credit increases aggregate demand visa vie potential output. As interest and inflation rate escalates, economic activity stagnates. When this trend is not considered by borrowers, it might render them unmanageably indebted and endanger the economy’s financial stability.

??specific policies and pending issue in context of global crisis::

the major lesson from the 2008-09 global financial crisis was that economic growth targeted policies requires reconsideration especially in change from convectional policy formulation approach. In particular, the financial crisis led to rethinking of the self-regulating policy approaches. Instead of relying on one-size-fits-all kind of policies, the crisis forced many nations particularly in developing and emerging economies to achieve self-assurance and streamlined crisis responses to exact needs. Furthermore, the function of anti-cyclical macroeconomic policies in supporting jobs and the economy was commendable. Unlike in previous crises, social protection was strengthened. In particular, the duration and level of unemployment benefits were increased, consequently changing from the perception that higher benefits spontaneously worsened market misrepresentations.  These changes resulted in improved protection of jobs in sustainable enterprises, rise in domestic demand through exploitation of social policy, and cuts in rights and wages.

??Are we still in danger of economic and financial crisis:::

Despite the massive government interventions and strategies to address the crisis, the strategies did not effectively address the major inequities that proved the crisis, especially the ineffective financial system. Like in medical illnesses, the interventions and strategies addressed the symptoms of the crisis, but failed to tackle the causes of the crisis. Consequently, the volume of credit relative to the actual economy is has remained slow in many developed economies. The case is particularly troubling for small enterprises. For instance, according to current surveys for European Union, many businesses, especially medium and small-sized ones are still struggling to access the credit system. A substantial moral hazard issue has also emerged from bailing out financial institutions without enforcing deep reforms.

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