Comparative study of the difference between Covid-19 crisis and the financial crisis of 2008 and their impacts on financial markets

Abstract

In this article, I would like to examine the consequences engendered by the several financial crises that happened before and compare them to each other. This paper will be talking about the most impactful financial crises in recent history such as the “Great Depression” of 1929-1939, the “Great Recession” of 2008 and the recent crisis that emerged as a result of the COVID-19 pandemic. I will be going through every financial crisis describing its history, and its impact on the global financial system, and comparing them to each other. In addition, this paper will make an attempt to forecast what we should expect in the future and what kind of challenges are awaiting the financial industry and the world. The financial world and the challenges it faces are changing with unimaginable speed, consequently the responsive actions should give adequate answers on what and how to do in order to mitigate the negative effects.

The global financial system is a vastly stochastic system. By the development of economic and financial theory scholars became more informed about the nature and reasons of financial crises. This paper is aimed to examine the consequences engendered by the several financial crises that happened before and compare them to each other. The major problem is to understand whether there was any difference in impacts on the financial markets caused by different crises or not. This paper will be talking about the most impactful financial crises in recent history such as, the “Great Recession” of 2008 and the recent crisis that emerged as a result of the COVID-19 pandemic. The reasons of choosing them are that:

1. From the historical perspective they happened not long ago
2. The impact on financial system of some of them is seem even today
3. To understand the new type of crisis, which was caused not by the financial or economic reasons but by the decease

The paper will start from the discussion of origins of the financial crises, and their emergence. The first part of the paper will concentrate on understanding how crises happen, the historical perspective, and then will be talking about the most impactful crises of the last 2 centuries. There will be short discussion of what can lead to the financial crisis, what are the reasons and causes of the crises. There will also be a discussion of how crises are formed and what stages they have. After we will talk about the types of financial crises and their effects. Finally, at the end of part one we will talk about the recent financial crisis which happened in 2008 named “Great Recession”. We will see how that crisis emerged and the features and impact of that crisis on the financial markets.

There are not so many events that are as old as human history. One thing which comes to the mind of people may be the fact that wars are sharing that feature. Although it is correct, there is another phenomenon which carries the same characteristic. That is the phenomenon of the “financial crisis”. Even though every crisis has its own historical, political, economic and financial background there are a lot of characteristics which are commonly shared by the majority of them.