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    "en": "A financial shock is an unexpected disturbance which originates from the financial sector and has a significant effect on an economy (e.g. national, regional, or global). The term is largely used to refer to events which have negative impacts (ECB, 2013). <br /> <p>ECB, 2013. <a href=\"https://www.esm.europa.eu/sites/default/files/financialshocksandthemacroeconomy.pdf\">Financial Shocks and the Macroeconomy: Heterogeneity and Non-Linearities. European Central Bank (ECB), Occasional Paper Series No. 143</a>. Accessed 12 September 2020.</p>"
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      "The term ‘financial shock’ generally refers to a disruptive event in the financial system, which manifests in the sudden re-pricing of assets (often in combination with a severe deterioration of economic conditions). Financial shocks are difficult to predict but tend to be more likely when borrowers are vulnerable, such as when they have taken on excessive risk relative to their repayment capacity (e.g. highly-leveraged firms that have both uncertain future profits and low liquidity) (Peersman, 2015). Financial shocks may be triggered by different sources of risk, that can be either inside or outside the financial system, and are often amplified by adverse macro-financial feedback effects, such as when a deterioration in economic conditions weakens the solvency of financial institutions and markets, which in turn results in tighter financial conditions for firms and households (Ong and Jobst, 2013). A significant economic slowdown could lead to rising business insolvencies, higher unemployment, and constrained public investment. They can morph into financial crises if a sharp decline in asset prices causes consumers and businesses to default on their loans, and financial institutions become unable to access liquidity – either in terms of cash or assets which are easily convertible into cash (Moretti et al., 2020). For example, the collapse of the U.S. sub-prime mortgage market, prior to the 2007–2009 Global Financial Crisis, was largely driven by excessive leverage of borrowers, an overheated housing market, and insufficient transparency when banks re-packed and combined mortgage loans into new financial instruments, through what is referred to as ‘securitization’ (Jobst, 2008). Recent currency and/or sovereign debt crises also illustrate that unsustainable external imbalances, such as a deteriorating current account (which reflects cross-border economic activities) and rising foreign currency borrowing by public or private sector organisations (if suddenly unwound), can amplify and/or cause fragilities in the financial system. Examples include the cases of the 1997 Asian financial crisis and the 2007–2009 Global Financial Crisis (Claessens et al., 2014)."
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