Impacts of the Financial Crises

A significant feature of the global financial crisis is that it results in a severe disruption to the banks funding markets. The global financial crisis of 2008 and the European Sovereign crisis (2010-‘12) were characterized by strained sovereign bonds and other underlying macroeconomic adjustments to balance of payment rebalancing flows which resulted in the intermittent emergence of liquidity and capital strains in the banking sector (ECB, 2012). During this period, banks interrupted lines of credit to non-financial corporations. This in return had significant impacts on firms’ cost of borrowing, corporate failures, investment, and employment decisions. This paper is intended to highlight these impacts.