let's assume the stock market of country a collapses due to the fact that investors speculated far too aggressively and eventually panics old ones sentiment changed this is a straightforward example of a financial crisis which as the name suggests is a crisis that has to do with the financial sector a very important sector of the economy but certainly not the only one as such one if investors regain confidence quickly and the share prices recover the financial crisis will end without major economic repercussions too if the opposite happens and panic spreads to other assets initially and then to the quote-unquote brick-and-mortar economy the financial crisis will end up causing an economic crisis as can be seen the term economic crisis is broader and we're dealing with something that affects the entire economy where it's many sectors from financial sector manifestations such as banks closing down to retail shops restaurants and anything else going bankrupt does it always have to be this way with a financial crisis leading to an economic one no not really as the 2020 situation made clear we can have a quote unquote real world economic shock first followed by asset price collapses in our case it was a pandemic which made the economy grind to a halt when it comes to many sectors and ultimately exposed the fragility of the financial one as well the conclusion is therefore fairly straightforward economic crisis represents the broader term but despite this fact either can cause the other in terms of solutions central banks and their monetary policies tend to be in the spotlight more so after a financial crisis whereas after an economic one the market will most likely demand a combination between monetary and fiscal policy or if you will the central bank plus government duo