A financial crisis is defined as a sharp, brief, ultra-cyclical deterioration of all or most of a group of financial indicators – short-term interest rates, asset (stock, real estate, land) prices, commercial insolvencies and failures of financial institutions (Goldsmith 1982, p. 42). Whereas a boom or bubble is characterized by a rush out of money into real or longer-term financial assets, based on expectations of a continued rise in the price of the asset, financial crisis is characterized by a rush out of the real or long-term financial asset into money, based on the expectation that the price of the asset will decline. Between the boom and a financial crisis may be a period of ‘distress’ in which the expectation of continued price increases has been eroded, but has not given way to the opposite expectation. Distress may be short or protracted, and may or may not end in crisis.
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