We are in the midst of a crisis that no one knows how it will turn out. Or do we? As in any other crisis, widespread bankruptcies, liquidity shortages, large losses, increasing unemployment rates, and failing financial institutions will be happening rather sooner than later. But is it really the same type of crisis that we saw in 2008 with the housing bubble and the Lehman bankruptcy or in 2000 with the dot-com bubble?
Endogenous vs. Exogenous Crisis – What’s The Difference?
The crucial aspect is to look at the underlying reasons for a crash. By differentiating between endogenous and exogenous crises, we can look at the crisis from a different angle and compare the corona crisis to previous crises.
Endogenous crisis – triggered by the system
An endogenous crisis comes from within the system. For example:
- Black Monday 1987: program trading and illiquidity
- Dot-com bubble 2000: overvalued technology companies
- Financial crisis 2008: subprime loans and credit default swaps