The responses of the central banks present very important economic implications that helped turnaround the economy. The responses of the central banks present some very interesting points that may be very useful for us in the future. Note that the economy follows certain cycles and sooner or later, we will hit again some snags in the banking industry that could lead to another global recession. By examining and learning from the past experiences of the banking system, we may be able to help predict and prevent certain events that could lead to a serious financial crisis. Moreover, by analyzing the responses of the central banks, we can learn which responses are effective and which are not. In light of this, this essay will strive to analyze the problems and events that lead to the economic debacle and then discuss the responses of the central banks to the crisis.The main literature used in this paper is the IMF working paper entitled Systemic Banking Crises: A New Database by Luc Laeven and Fabian Valencia (November 2008) and Central Bank Response to the 2007–08 Financial Market Turbulence: Experiences and Lessons Drawn by Alexandre Chailloux, Simon Gray, Ulrich Klüh, Seiichi Shimizu, and Peter Stella (September 2008). The first document which is authored by Laeven and Valencia defined systemic banking crisis. It also presented a vivid picture as to how the systemic banking crisis often starts, how the crisis progress and how the central banks respond to the situation. On the other hand, the second document which is authored by Chailloux et al talked about the responses of the central banks to the banking crisis in 2007-2008. It provided an assessment as to how effective and how efficient are the responses of the central banks in resolving the economic problems brought about by the banking crisis.Aside from the two working papers of the central bank, this paper also used the speech of Ben S. Bernake, the chairman of the United States Federal Reserve.
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