Global Economic Crises

In terms of the sectors they affect, economic crises are divided into two as real crises and financial crises.

In general, situations of recession, inflation and deflation are considered as the economic crisis.

Real Sector Crises: Contraction in production or employment in the field of goods and services.

There are basically three forms of real sector crises which are inflation crisis, recession crisis and unemployment crisis (summarised in figure 5.1, p. 119 )

There are many distinctions in the literature regarding the types of financial crisis. However, based on a generally accepted approach, financial crises can be grouped under four categories: Monetary crises, banking crises, systemic financial crises and external debt crises.

Political Variables: Government changes, political instability, developments that lead to loss of confidence, and unnecessary election decisions

External debt crisis mean that a country is faced with the inability to pay its current foreign debts for public and/or private sectors.

As a matter of fact, each model tried to explain the new crisis by eliminating the shortcomings of the previous model. These generation models for financial crises were marked by Krugman’s research.

However, the inadequacy of these two models in explaining the Southeast Asian Crisis in 1997 led researchers to develop new models The fact that after it emerged in Thailand, spread to other Asian countries, Korea, Indonesia, Malaysia and the Philippines, which had similar characteristics, led to a new model called the third generation (contagion) crisis models.

As a matter of fact, the 1929 crisis, which was described as the most comprehensive, deepest and longest-lasting crisis in the 20th century, started with the fall of stock prices on September 4 and spread rapidly to many countries following the stock market collapse on 29 October, also known as the Black Tuesday.

The US central bank has implemented a strict monetary policy and contributed to the economic recession due to the fear that the false expectations about inflation are likely to lead to a capital outflow or a loss of confidence in investors and the fear of the dollar’s depreciation.

Globalization: In the international system, globalization means that the economic, political, and cultural elements of states extend beyond the national boundaries, spread around the world, and facilitate and increase the political and economic interactions between states.

We can list the most important financial crises in and after this period in Turkey and in the world as follows: 1992-1993 European Exchange Rate Mechanism (ERM) Crisis, 1994-1995 Mexican (Peso) Crisis, 1994 Currency and Banking Crisis in Turkey, 1997 South East Asian Crisis, 1998 Russian Crisis, 2001 Argentina Crisis, November 2000 and February 2001 Currency and Banking Crises in Turkey, 2008 Global Financial Crisis, 2010 Greek Government Debt Crisis - Euro Crisis,

On March 13, 1979, the European Monetary System (EMS) was established with the participation of Italy, Spain, Germany, France, Belgium, Luxembourg, the Netherlands, Ireland, and Denmark. 

The crisis, which had an expansionist effect in the Latin America region, had become more and more felt all over the world and had become deeper and deeper.

On July 8, 1994, a stand-by agreement was signed with the IMF.

1997 South East Asian Crises  began in Thailand in 1997, expanded its sphere of influence by expanding into Taiwan, Singapore, Hong Kong and South Korea, which are called the Asian Tigers.

Hyperinflation: This is the type of inflation in a country where the inflation rates reach to three or four digits per year.

In Argentina, which was forced to declare a moratorium on 24 December 2001, four governments were established in two weeks. Moratorium means the Borrower declares that they cannot pay all or part of their debts due to the loss of their ability to pay.

On April 14, 2001, the Program on Transition to Strong Economy, prepared with IMF support and under Derviş leadership, included both stabilization measures and long-term structural-institutional changes.