Instructions: Read the case study “The Global Financial Crisis and its Aftermath: Declining Cross-Border Capital Flows” below and answer question 5. Explain your answer in a clear and concise manner....

Running Head: The Global Financial Crisis and Its Aftermath     1
The Global Financial Crisis and Its Aftermath         
THE GLOBAL FINANCIAL CRISIS AND ITS AFTERMATH
Table of Contents
Likelihood of the Occurrence of a Financial Crisis Similar to 2007-08    3
The Intervention of the Central Bank    4
Mitigating the Risks of Financial Crisis    5
The Global Capital Flows    6
Multinational Firms Limiting the Impact of Future Crisis on Global Financial Systems    7
References    10
Likelihood of the Occurrence of a Financial Crisis Similar to 2007-08
    The financial crisis of 2007-08 was the worst financial crisis in the history since the great depression of 1930. This period of recession led to the collapse of Lehman Brothers, which was the fourth largest investment bank in United States. This was one of the definitive moments, which played a major role in pushing the US economy into worst economic and financial crisis after 1930. This type of economic crisis can happen again. The existing federal policy points towards the fact that the financial crisis like in the year 2007-08 is likely to happen again. This crisis may again occur because of the falling stocks or the prices of the real estates. Though the policies undertaken by the government have helped to stabilize the financial markets, there are certain uncertainties such as uncertainties of the future Federal Reserve Policy, the rapidly speeding revolving doors between Washington D.C. and Wall Street and the deregulation of the financial sector, which may lead to a period of recession and financial crisis as happened in the year 2007-08, causing a major setback to the global economy (Phan & Daly, 2020).
    This repeated period of financial crisis or recession may adversely affect the economic growth of nations and will lead to increase in unemployment, slumps in the stock market and will contribute to the increasing national debt. All these factors will consequently adversely affect the abilities of the firms to raise capital to fund investments. Businesses with smaller cash reserves and large capital assets may not be able to secure additional financing leading to harder survival during the times of the financial crisis. The private capital investment will go down considerably leading to the miss of many economic opportunities. The global economy as well will have to suffer from certain adverse impacts, if there is a repeated period of financial crisis like the one in 2007-08. This may lead to an economic downturn and several financial markets, banks and the real estate industry all across the globe will be devastated. This may even lead to an increase in the home mortgage foreclosures on a global level forcing millions of people to lose their valuables and belongings including their lifetime saving, their homes and their jobs. This will lead to the scarcity of assets and would therefore lead to the collapse of financial sectors particularly banks in the world economy.
The Intervention of the Central Bank
    The intervention of the several governments into the matter and the intervention of the central bank such as the European Central Bank and the Chinese Central Bank helped to pump liquidity into the economic systems at the global level. The intervention of the central banks helped to control the interest rates. The discrete intervention of the central bank helped to regulate the crisis making major changes into the financial and banking system. The central banks and the government of some of the major world economies acted in a responsible manner to reduce the risks of total collapse. Their swift and coordinated decisions helped to steady the markets. The central Banks also helped major financial institutions to take necessary measures so that speedy recovery can be observed (Cheng, Dai & Dufourt, 2017). The central Bank lowered the interest rates and eased the monetary policy, which helped the banking system to recover. Efforts were also made to implement fiscal stimulus. Despite of the several measures undertaken and efforts made, the plan did not seem to work as well as it was expected to work in order to control the situations during the financial crisis.
    If the Central Banks would...