What is crisis?

The meaning of crisis in the field of economía refers to the periods in which the financial system goes through a delicate situation for a long period of time.

When we speak of an economic crisis, it implies a series of negative changes in the main economic variables, especially in the Gross Domestic Product (GDP) and employment. However, it is difficult to define exactly when an economy has entered a period of crisis.

The different meanings that the Royal Spanish Academy contributes to the term crisis refer above all to sudden changes and the appearance of significant difficulties in some aspect of life. Therefore, the concept of economic crisis should be used for situations in which economic problems last over time and are not transitory.

Two salient aspects that define economic crises are the instability that affects the markets and the consequences that they cause in the sectors in which it arises in the beginning and that will end up dragging the rest of the system afterwards.

Among the most frequent symptoms to identify the beginning of a crisis are the destruction of jobs, the devaluación currency or prominent interest rate fluctuations.

Economic crises can be isolated or concentrated in an economic system or sector. There is also the risk that it will spread to a more global scope, as happened with the one that affected the world economy in 2008 and subsequent years.

Types of economic crisis

There are several kinds of economic crises, the following being the most prominent:

  • Financial crisis
  • Economic bubble
  • Balance of payments crisis
  • Debt crisis

At the moment in which these symptoms are prolonged in time, it would come to speak of recession or economic depression. The first term is used when there are two consecutive quarters with negative economic data, while the economic depression refers to long periods of decline.

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