Investigating of the first signs of global financial crises in the money market

Abstract

Global financial crises are a recurrent phenomenon, which is why it is important to analyse the theoretical and practical aspects of the emergence of a financial crisis. This paper defines the concept of financial crisis and its causes, and analyses the global financial crises that have had the largest and most profound effects, starting with the bursting of the speculative bubble and the banking crises. The aim of the study is to provide a theoretical basis and an empirical assessment of the characteristics of the first global financial crises in the money market. The literature analysis identifies the main factors that have the greatest impact on the emergence of financial crises. To assess the first indicators, 15 European countries in terms of population size and 7 money market indicators are selected. The paper uses the TOPSIS multi-criteria assessment method. The method ranks countries according to the factors that cause financial crises. The method is designed to identify the potentially most risky country in which a financial crisis could break out and affect other countries on a global scale, thus creating a domino effect. The results of the study allowed the identification of the first signs of financial crises in the money market: the inflation and unemployment rates and the capital-to-assets ratio of banks. The results also suggest that, of all the countries selected, Poland will be the first to experience financial difficulties and the first signs of a financial crisis.