Associative evidence

What is associative evidence? Explain the difference between the two types of associative evidence.


Sample Solution

 financial crisis occurs when a panic or a fear of the panic affects the overall functioning of the financial system (Metrick and Geithner, 2015). This is marked by the failure of banks, and/or the sharp decrease in credit and trade, and/or the collapse of an exchange rate regime, etc., generating extreme disruption of these normal functions of financial and monetary systems, thereby hurting the efficiency of the economy (Goldstein and Razif, 2015). The global financial crisis that erupted in 2007 and accelerated in autumn 2008, throwing economies around the world into the worst recession since The Great Depression in the 1930s, stemmed from the meltdown of subprime mortgages and securitized products following the credit boom that peaked in the middle of the year.
A decade on, the effects of the 2007 financial crash are still felt by the world economy and can be seen by what is currently happening in the United States economically and with regards to income inequality. The recovery of world economies from this crisis remains feeble as GDP is still below its pre crisis peak in many rich countries including the US (Center on Budget and Policy Priorities, 2017). The effects of the financial crisis is still also especially prominent in Europe, where the global financial crisis has evolved into the European sovereign debt crisis which has been ongoing since December 2009 when Greece admitted that its debts have reached 300bn euros, amounting to 113% of Greece’s GDP, almost double the eurozone limit of 60% – the highest in modern history (Metrick and Geithner, 2015). 


This has revealed the need to rethink fundamentally how financial systems are regulated and managed. The current implicit view behind economic models is that markets and economies are inherently stable, so by design, offer no immediate handle on how to think about or deal with a major systemic crisis. This dissertation aims to explore different policies and the extent to which they can act as tools to prevent financial crises. This includes current debates revolving around financial sector reforms as well as the key areas for policy action to reduce the risk of crises and address the weaknesses in the current regulatory and policy frameworks.


Could the Financial Crisis Have Been Avoided?


Although a number of developments helped t