Differences between a Market Crash and Financial Crisis

Abstract

This paper examines the fundamental distinctions between market crashes and financial crises and their root causes. The present study will additionally analyze the historical instances of said occurrences, emphasizing the insights that can be gleaned from prior occurrences. Furthermore, the present study aims to examine the diverse reactions of policymakers and financial institutions to these occurrences, as well as the determinants that shape their decision-making processes. This paper aims to investigate the research questions by utilizing various academic sources, such as scholarly articles, books, and reports from credible financial institutions. This paper intends to give policymakers, investors, and the general public an enhanced comprehension of the intricate and momentous market crashes and financial crises by presenting a comprehensive overview. This paper's primary objective is to contribute to the current discourse on the effective measures that can be taken to reduce the potential risks that arise from market volatility and safeguard the economy against the adverse effects of financial crises.