FINANCIAL MARKETS AND OPERATIONS

Financial Markets and Operations

TABLE OF CONTENT

Introduction3

Global financial crisis 20084

What was the reason/cause the global financial crisis?6

The difficult decisions taken by European Central Bank8

Peter Praet words on financial crises11

Purpose of the speech11

Challenges to be addressed12

Reason for the speech13

The global financial crisis and the role of monetary policy by Peter Praet14

The role of Central Banks after the Financial Crisis17

A Direction of Monetary Policy18

Monetary Policy Responses As During the Global Crisis19

Conclusion20

References22

Financial Markets and Operations

Introduction

Any country is unable to progress if it does not have a strong financial position. Governments of many countries have this as a big challenge in front of them that they have to maintain their financial position and should strive to make successful progress in it so as to have a better economical position for their country. Countries do face some financial crisis according to their handling of financial transactions but the question is what to do when there is a global financial crisis. There are not many reasons for a global financial crisis as compared to those crises that occurs within the country due to their own mishandling of financial related matters. A financial crisis occurs when there is a large demand for the consumption of money as compared to the supply of the money that is less than the demand. This can be explained this way as well that the liquidity of the money is more rapidly disappeared as the money that is available in the market is being withdrawn from different financial institution such as banks that basically pushes these banks to either sell their other kinds of investments so as to meet up for the amount of shortfall they might be facing to if they are at the height of collapsing.

A financial crisis is a situation in which assets or any other financial institutions drop their value very quickly. This crisis is mostly connected with a run of the bank or with a panic which involves the investors to sell off their valuable assets and/or take their money that was in their saving accounts with this concept that if they still keep these money within any financial institution, the value of their asset will lower down with others. A financial crisis can come at any time due to merely the overvalued measurement of assets and can be made worse by the behavior of the investors. A more frequent selling of the assets can lower the prices of the assets or the value of that amount that has been withdrawn, which was kept in the saving accounts. If there is no checking of any such financial trend then there is a much higher chance that the economy could go into a depression or a recession.

The reason for discussing global financial crisis in this paper is this because the same happened in the year 2008. Many countries became the victim of this financial crunch as a result of which they had to face a lot of financial problems, not only globally, but also ...