FINANCIAL CRISES AND THE IMPORTANCE OF FINANCIAL POLICY

Abstract

Economies have faced various crises from the past to the present and have applied to monetary and fiscal policies in order to get out of the crises. The different reasons for the emergence of crises determine which policies will be implemented and with what timing. On the other hand, especially the post-1980 crises are experienced on a global scale and can affect all economies in a short time due to the close relationship of economic networks with each other. In the study, the crises from the great world depression of 1929 to the present were discussed, and the fiscal policy practices in the fight against crises were examined. Keynesian fiscal policies, which started with the Great Depression, lost their popularity during the decades following the oil crisis, but with the 2008 global crisis, the inadequacy of monetary policy was understood, and there was a forced return to fiscal policy practices. In the current period, inflation increases due to the Covid 19 pandemic and decreases in growth expectations prompt governments to implement expansionary fiscal policies. In summary, it can be said that the fiscal policy remains the most basic policy implemented to get out of the economic crisis. Considering the freedom of capital movements and the interdependence of financial markets in today's global economic system, fiscal policies should be compatible with monetary policies and financial structure.