TÜRK EKONOMİSİ - Deneme Sınavı - 2

According to a general definition, the economic crisis is the deterioration in an economy that occurs unexpectedly and with great severity which significantly affects the economic activity. More precisely, the economic crisis is the unexpected and severe deviations in real and financial indicators.

A financial crisis is often associated with one or more of the following phenomena :

But there are not and increases of investment of the firms and probably unemployment rate increases during financial crises

Financial crises take place in various ways, and there are four different financial crisis definitions depending on the source to distinguish them. These are currency crisis, banking crisis, systemic financial crises, and sovereign debt crisis. Interest rate crises is not one of them.

In addition to the speculative attacks on the currency, the inability to finance the current account deficit causes the currency crisis.

According to the balance of payments definition which is a statistical report of all transactions between a country and the rest of the world over a period of time, the sum of all transactions recorded in the balance of payments must be zero, so deficits in the current account must be financed by net capital inflow.

The banking crisis may arise from the institutional structures of banks, namely their high leverage balance sheets, macroeconomic shocks, risky banking transactions, intense competition, poor management, institutional weakness and dependence on short-term foreign resources and as well as from bank runs (also called as a run at the bank).

The overlap of the banking crisis and the currency crisis is called the twin crises. The damage caused by the twin crises is more severe than a single crisis.

The causes of systemic financial crises can be listed as follows: irrational piling-on of debt; moral hazard induced by mispriced government-provided deposit insurance; complex relationships among counterparties; an unwillingness of dealers to trade; a failure of the Central Bank to provide liquidity as needed; unpredictable adverse shocks that come from outside the financial sector; and bank runs.

Governments take various measures to eliminate or at least reduce the negative effects of economic crises on the economy. These measures are called stabilization programs

Orthodox economics is also called mainstream or conventional economics. Orthodox economic policy is a term that refers to the application of conventional and traditional economic policy.

The spread and severity of economic crises among countries depend on their international economic relations, which are measured with international goods flows (foreign trade); international service flows (tourism, transportation, consultancy, etc.); international factor flows and international capital flows.

A financial crisis is often associated with one or more of the following phenomena:

• Substantial changes in credit volume and asset prices.

• Severe disruptions in financial intermediation and the supply of external financing to various actors in the economy.

• Large scale balance sheet problems (of firms, households, financial intermediaries, and sovereigns).

• Large scale government support (in the form of liquidity support and recapitalization).

Financial crises take place in various ways, and there are four di erent financial crisis definitions depending on the source to distinguish them. ese are currency crisis, banking crisis, systemic financial crises, and sovereign debt crisis.

It is often called sudden stop or capital account or balance of payments crisis. A currency crisis involves a speculative attack on the currency resulting in a devaluation (or sharp depreciation), or forcing the authorities to defend the currency by expending large amount of international reserves, or sharply raising interest rates, or imposing capital controls

The banking crisis may arise from the institutional structures of banks, namely their high leverage balance sheets, macroeconomic shocks, risky banking transactions, intense competition, poor management, institutional weakness and dependence on short-term foreign resources and as well as from bank runs.

The causes of systemic financial crises can be listed as follows: irrational piling-on of debt; moral hazard induced by mispriced government-provided deposit insurance; complex relationships among counterparties; an unwillingness of dealers to trade; a failure of the Central Bank to provide liquidity as needed; unpredictable adverse shocks that come from outside the financial sector; and bank runs”.

The sovereign debt crisis is the government’s failure to pay internal and external debts belonging to the public and private sectors. Sovereign debt crises occur when the combination of the level of a government’s debt and the prospects of continued fiscal deficits couple to raise doubts about its ability or willingness to pay o all of its obligations at face value.

In III it says that  "the government’s failure to meet its debt obligations will increase capital inflows" which  is unlikely. So any choice including III is wrong.

Orthodox economic policy is a term that refers to the application of conventional and traditional economic policy. 

These policies do not contradict the logic of the market economy as they are experienced policies.

Orthodox stabilization programs are recommended to countries to overcome high inflation and balance of payments problems in the 1950s and 1980s.

The Banking Regulation and Supervision Agency (BRSA) and the Capital Markets Board of Turkey (CMBT) are two key and significant public institutions that supervise the Turkish financial markets.

The Banking Regulation and Supervision Agency (BRSA) was established and started to operate in the mid of 2000.