Global financial crisis: causes and perspectives

Abstract

Purpose

This study aims at examining the current global financial crisis, by emphasizing its main causes and perspectives to define the way they can be avoided in the future. The paper argues that there is a need for a new International Financial System with the function of coordinating and guiding the different national and supranational institutions.

Design/methodology/approach

This article used complexity theory and viable system approach.

Findings

The findings suggest they are implicit features of these kinds of markets, due to their high uncertainty and hyper‐competitiveness, rather than temporary deviation from normal equilibrium. In this way, financial markets can be thought as Complex Adaptive Systems (CAS), which may precipitate in disorder and chaos because of a seemingly mild event, which activates latent forces and leads to emerging and unpredictable consequences. The orientation of international partners is to move towards a new international financial system, where the stabilization of financial system does not pass only through the bodies created in Bretton Woods, but through the endowment of new rules and new structures.

Research limitations/implications

The research faces with evolutionary issues and it is impossible to know the total value of toxic derivatives still circulating in the world. Furthermore, the banks are still using the innovative finance to generate short‐term profits and shareholders' value.

Practical implications

The findings suggest some measures to limit future instability and crises, and to reduce their negative consequences.

Originality/value

The paper provides a new methodology to examine the financial crises and the way to limit them.

Citation

Iannuzzi, E. and Berardi, M. (2010), "Global financial crisis: causes and perspectives", EuroMed Journal of Business, Vol. 5 No. 3, pp. 279-297. https://doi.org/10.1108/14502191011080818