Financial Crisis vs. Economic Crisis: One Minute Explanation/Comparison (Definition, Examples, etc.)

let's assume the stock market of country

a collapses due to the fact that

investors speculated far too

aggressively and eventually panics old

ones sentiment changed this is a

straightforward example of a financial

crisis which as the name suggests is a

crisis that has to do with the financial

sector a very important sector of the

economy but certainly not the only one

as such one if investors regain

confidence quickly and the share prices

recover the financial crisis will end

without major economic repercussions too

if the opposite happens and panic

spreads to other assets initially and

then to the quote-unquote

brick-and-mortar economy the financial

crisis will end up causing an economic

crisis as can be seen the term economic

crisis is broader and we're dealing with

something that affects the entire

economy where it's many sectors from

financial sector manifestations such as

banks closing down to retail shops

restaurants and anything else going

bankrupt does it always have to be this

way with a financial crisis leading to

an economic one no not really

as the 2020 situation made clear we can

have a quote unquote

real world economic shock first followed

by asset price collapses in our case it

was a pandemic which made the economy

grind to a halt when it comes to many

sectors and ultimately exposed the

fragility of the financial one as well

the conclusion is therefore fairly

straightforward economic crisis

represents the broader term but despite

this fact either can cause the other in

terms of solutions central banks and

their monetary policies tend to be in

the spotlight more so after a financial

crisis whereas after an economic one the

market will most likely demand a

combination between monetary and fiscal

policy or if you will the central bank

plus government duo