“Economic Sciences: theory and practice” is scientific, refereed, biannual journal. The Journal of “Economic Sciences: theory and practice” has been founded by Azerbaijan State University of Economics in 1994.
The Journal has been received to registration in the centre of international ISSN (International Standard Series Number, ISSN-2220-8739). Also, it has been included by the Supreme attestation Commission under the President of Azerbaijan Republic to the list of scientific publications on economic sciences.
Salman Ali Najafov Scientific-Research Institute of Economic Studies, UNEC
The paper demonstrates that debt crises are caused by debt rigidity. It is noted that similarly to wage and price rigidity debt rigidity makes markets unable to adjust quickly and adequately to the shocks in economy. It is justified that to make companies and banks more flexible and resistant to shocks, companies’ liabilities similarly to income and assets price should be flexible. Paper argues that crisis in Japan and banking fragility in US and euro area countries are caused by debt rigidity, and these problems can be solved by liability flexibility which can be provided by profit participating financing.
Keywords: debt crises, debt rigidity, profit/loss sharing financing, banks, liability flexibility.
JEL classification: G01