The mathematical approaches are also linked with the element of positive feedback and they actually revolve with the participant’s decision making process. They are actually responsible for changes in the asset values that are related with the fundamentals of economics. There is certain model that implies that the fixed exchange rate can be stable for a long period of time but the flaw in this model is that it will eventually fall when the currency of a certain country falls drastically (Chui, Gai, & Allen 2005). In the similar manner it can also be said that the economy that possess positive feedbacks can have more equilibrium.
Besides that it can be said that there are certain types of financial crisis that are affecting the economic conditions of the world.
There are certain types of financial crisis that have affected the economic conditions of the world. These financial crises are discussed below:
The failure of the bank is usually regarded as the financial, social and an economic disaster (Bogen 1981). The banking crisis usually initiates because of the depositors rush of withdrawals and this scenario is also categorized as the BANK RUN. It is quite difficult to pay off the deposits of the customers quickly that is the reason why banks usually end up in bankruptcy. In the similar manner certain other scenarios came into play and these scenarios are known as credit crunch and therefore it can be clearly said that banks are usually the initiators of the financial crisis. There are numerous examples of this run and the run of on the Northern Rock in 2007 is regarded as one of the famous banking runs.
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