 The economic costs of economic risk in the financial market (Koszty ekonomiczne ryzyka systemowego na rynku finansowym)Problemy Zarzadzania, 2012, vol. 10, issue 39, 33-53 Abstract: Review of the world literature on the nature of systemic risk indicates a large variation of the definition. One definition is as follows: systematic risk is the probability that the financial system will fall apart due to external actions, dysfunctions in the functioning of the systematically important financial institutions, or a loss of confidence among financial market participants, leading to the loss of market value of trust assets or their issuers of such a large scale in order to have a negative impact on the real side of the economy. This understanding of systemic risk diminishes public finances by: 1) increasing spending referring to the recovery of financial institutions that are “too big to fail” (the problem of rising budget deficits of the states), 2) the depletion of capital income investors, 3) raising the cost of financing and maintaining liquidity in the financial market. The systematic risk manifests itself mainly in the growing foreign debt and to the banking system. A loss of confidence in financial markets happens prior to this, and the rebuilding process usually takes years. The crisis usually brings along the depreciation of the national currency and changes in the real interest rates, requiring a radical fiscal reform. The wave of bank failures is the cause of rapid reprising of financial assets, which results in the loss of stock market investors. On the other hand, if some banks are insolvent, there is a crisis of confidence and some other institutions are the sole providers of credit, which increases the cost of financing for business and households. The paper is to identify systemic risk costs incurred by governments to restore the ability of the financial system to function properly, to discuss the growing debt and losses resulting from the lack of liquidity in financial markets. Date: 2012 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sgm:pzwzuw:v:10:i:39:y:2012:p:33-53 Access Statistics for this article More articles in Problemy Zarzadzania from University of Warsaw, Faculty of Management Contact information at EDIRC. |
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