Financial Crisis Generation And Transmission Mechanism

In 2007 , the sub-prime crisis of America broke out and expanded to be a worldwide financial crisis soon. The theories of financial crisis were concerned by economists all over the world again. The development of the theories of financial crisis has been experienced three generations. Each innovation of the theory is based on new characters in a new crisis that is different from the past. Rational Expectation Hypothesis helps economists understand microcosmic behaviors in financial market. The research based on speculator's mentality was enhanced obviously. This paper analyzes three important financial crisis: the European monetary crisis in 1992, the Asian financial crisis in 1997 and the American sub-prime crisis in 2007. Then we can acquire some factors which can work on the production and transmission, such as unbalance of macro-economy, unbalance of payments and unbalance of capital market.In essence financial crisis is result of economic bubble. This paper discusses the process of economic bubble causing financial crisis from both plutonomy and economics. The plutonomy is based on Marxist's theory, and the other provides a new identical equation of monetary based on Fisher's equation to illustrate the process mentioned above, combined with theory of economic bubble. What is more, financial instability, international financial system, financial institution and financial supervision are all connected factors of causing financial crisis. Aiming to distinguish the different types of financial crisis earlier, the identify lies on economics program statistic index. There are four main types of crisis transmission effects named monsoonal effect, trade spillover effect, financial spillover effect and pure contagion effect. They were proved to be right in practice.In the end, four different processes of financial crisis production and transmission are described and several pieces of advice are given by abovementioned figures.