Which of the following are likely to lead to international financial crises? a

Business Dec 23, 2020

Which of the following are likely to lead to international financial crises?

a. waves of overlending and overborrowing through repaid credit expansion

b. exogenous international shocks

c. exchange rate risk and international short-term lending

d. all of the above

Expert Solution

d. all of the above. That is;

a. waves of overlending and overborrowing through repaid credit expansion,
b. exogenous international shocks and
c. exchange rate risk and international short-term lending.

Sometimes, all three are compounded to make matters even worse. Overlending causes solvency and liquidity issues. The other two cause fluctuations in demand and supply for spending and investing.

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