Importance The research examines the current stage of global economic development, which may be considered as a permanent crisis generating high risks of financial instability and challenges for the real sector. The global economy functions so that globalization processes pursue only interests of highly developed economies and international financial institutions they establish as a shelter for speculative capital. The remaining countries experience the chaos of free market, where representatives of the above international financial institutions set up rules. Emerging economies are especially vulnerable and exposed to such risks, since their markets are already open, but lack mechanisms that soften the effect of fundamental reasons of financial instability. Objectives The research identifies the reasons for financial instability and crisis in the real sector worldwide and nationwide, determines the main challenges for the current development, and substantiates development vectors and ways out from the existing situation. Methods Based on a systems formalization approach and multi-factor analysis, I identify unbiased and subjective reasons for shocks seen in the financial and real sectors. Results I found external and internal factors, which generated difficulties in the national economy, and propose possible remedies. Conclusions and Relevance I determined the systemic nature of the crisis, external reasons for the crisis in the real sector and financial volatility, internal factors that influence the national finance and economy, developed descriptive (explicit) models of the current processes, and formulated responses to external and internal challenges. This research and recommendations may be used as a basis for further research to address financial volatility, crises, and resolve the current situation.
Keywords: financial instability, crisis, real sector, virtual sector, fiscal and monetary policy, innovative vector
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