...Financial Crisis Introduction In recent decades, financial crises have stopped the momentum of economic development of many countries around the world. In some cases, they have destroyed almost completely different financial systems. The term financial crisis is applied broadly to a variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Financial crises directly result in a loss of paper wealth but do not necessarily result in changes in the real economy. Many economists have offered theories about how financial crises develop and how they could be prevented. There is no consensus, however, and financial crises continue to occur from time to time. The purpose of this study is to analyze the causes of financial crisis, the types of financial crisis and the impact caused in the countries that have experienced them. Explanation of financial crisis Financial crises have come in many forms although they have many common elements. A financial crisis is often associated with one or more of the following phenomena: substantial changes in credit volume and asset prices, severe disruptions in financial intermediation and...
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...Chapter 1 Pages: 1.0 Introduction…………………………………………………………….1 1.1 Background…………………………………………………………….2 1.2 Statement of the study…….………………………………………........2-4 1.3 Objective of the study..................................................................…........4 1.4 Research questions……………………………………………...…...5-11 1.5 Research hypothesis………………………….……………………........12 1.6 Significance of the research……………….……………………………12 Chapter 2 2.0 Literature review………………………………………………..……….13 Chapter 3 3.0 Research design………………………………………………………..17 3.1 Study population……………………………………………………….17 3.2 Scope of the study……………………...………………………………17 3.3 Sample and sampling techniques……….………………………………17 3.4 Methods of data collection……………………………………………...18 3.5 Methods of data analysis………………………………………………..18 3.6 Time schedule…………...………………………………………………19 3.7 Financial budget………...……………………………………………….20 3.8 Bibliography…………..…………………………………………………21 Chapter 1 1.0 Introduction. The value of money depends upon price level of commodities. When the price level rises, the value of money decreases and this may also be opposite. The changes in the value of money can affect different sections of the community. For instant, when the price level goes up, businessmen, industrialists and peasants gain, but fixed...
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...Journal of Contemporary Eastern Asia ISSN 2383-9449 Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun (2012) Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Journal of Contemporary Eastern Asia Vol. 11, No. 1: 43-56 Journal abbreviation: J. Contemp. East. Asia Stable URL: http://eastasia.yu.ac.kr/documents/Fumitaka_11_1.pdf www.JCEA-Online.net Open Access Publication Creative Commons License Deed Attribution-No Derivative Works 3.0 Journal of Contemporary Eastern Asia, Volume 11, No.1: 43-56 http://dx.doi.org/10.17477/jcea.2012.11.1.043 Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun The paper chooses the “Asian Financial Crisis” as a case study to examine its impact on Malaysian economy and describes how Malaysian government responded to the crisis. It also focuses on the Asian financial crisis’ impact on the employment of banking sector in Malaysia. In the finance, insurance, real estate and business service sector, a number of 6,596 workers were retrenched. Banks were forced into mergers and acquisition as well as downsizing, trim lean, organizational changes and introduction of new technologies. Excess workers were offered a “voluntary separation scheme.” These retrenched workers became the urban poor facing high cost of living and no opportunity for jobs as there is no safety net provided. 1. Introduction...
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...| The Eurozone Crisis | | | ECON 3860Word Count: 1,495 | | The Eurozone Crisis The Eurozone is a combined group of countries using the euro as their only currency. It was created in 1999 and currently consists of 17 countries – not all part of the European Union (Investor Words). Within the Eurozone, the countries follow a monetary policy and controlled by the European Central Bank (in other words, the ECB controlled the supply of the euro within the 17 countries). In an attempt to control government debt levels and deficit spending the Maastricht Treaty was created. As years passed, some countries government deficit began to rise and increased debt levels. By 2010, Greece (3% of the Eurozone) had public debt around 100% of their GDP. In order to lower their debt levels, the Greek government had increased their taxes and their borrowing levels. Solutions for fixing this issue consisted of stronger countries paying off the Greek debt – however not everyone agreed to such methods. Eventually, the value of the euro went down in the exchange markets and other Eurozone countries such as: Portugal, Italy, Ireland and Spain faced the same problem as Greece. The International Monetary Fund (IMF) and the European Financial Stability Facility (EFSF) donated money to help reduce the amount of debt – however not enough (Krugman, Obstfeld, Melitz, 2011). Since the Eurozone is controlled by monetary rules and does not consist of fiscal union (government collection of tax’s)...
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...SAMPLE COPY RESEARCH PROPOSAL PROPOSED RESEARCH TITLE: AN INVESTIGATION INTO THE DOWNWARD TREND IN GLOBAL STOCK MARKETS: A CASE STUDY OF THE NIGERIAN STOCK MARKET RESEARCH BRIEF The history of stock trading and trading associations can be traced as far back as the 11th century when Jewish and Muslim merchants set up trade associations. After centuries of evolution, stock markets have become the symbol of commerce in the modern world. It operates in various countries and trades a range of securities. The world stock market capitalisation is estimated to be about $ 36.6 Trillion. The stock market has various functions such as capital mobilisation, investing opportunities, risk distribution etc. The major stock exchanges in the world today include New York Stock Exchange, London Stock Exchange, Frankfurt Stock Exchange, Italian Stock Exchange, Hong Kong Stock Exchange and Tokyo Stock Exchange. There have been various stock market crashes in the past such as the Wall Street crash of 1929, the crash of 1973/74, the 1987 crash; called black Monday, the dotcom bubble of 2000 and the more recent crash in 2008 caused by the subprime mortgage crisis in America. The economic crisis of 2008 which originated in America spread to various economies in the world and their stock markets were affected. It reduced the value of stocks around the world by as much as 41% and affected both major and emerging stock markets. The Nigerian stock market is an emerging market in Africa. After...
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...SAMPLE COPY RESEARCH PROPOSAL PROPOSED RESEARCH TITLE: AN INVESTIGATION INTO THE DOWNWARD TREND IN GLOBAL STOCK MARKETS: A CASE STUDY OF THE NIGERIAN STOCK MARKET RESEARCH BRIEF The history of stock trading and trading associations can be traced as far back as the 11th century when Jewish and Muslim merchants set up trade associations. After centuries of evolution, stock markets have become the symbol of commerce in the modern world. It operates in various countries and trades a range of securities. The world stock market capitalisation is estimated to be about $ 36.6 Trillion. The stock market has various functions such as capital mobilisation, investing opportunities, risk distribution etc. The major stock exchanges in the world today include New York Stock Exchange, London Stock Exchange, Frankfurt Stock Exchange, Italian Stock Exchange, Hong Kong Stock Exchange and Tokyo Stock Exchange. There have been various stock market crashes in the past such as the Wall Street crash of 1929, the crash of 1973/74, the 1987 crash; called black Monday, the dotcom bubble of 2000 and the more recent crash in 2008 caused by the subprime mortgage crisis in America. The economic crisis of 2008 which originated in America spread to various economies in the world and their stock markets were affected. It reduced the value of stocks around the world by as much as 41% and affected both major and emerging stock markets. The Nigerian stock market is an emerging market in Africa. After attaining...
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...| The Eurozone Crisis | | | ECON 3860Word Count: 1,495 | | The Eurozone Crisis The Eurozone is a combined group of countries using the euro as their only currency. It was created in 1999 and currently consists of 17 countries – not all part of the European Union (Investor Words). Within the Eurozone, the countries follow a monetary policy and controlled by the European Central Bank (in other words, the ECB controlled the supply of the euro within the 17 countries). In an attempt to control government debt levels and deficit spending the Maastricht Treaty was created. As years passed, some countries government deficit began to rise and increased debt levels. By 2010, Greece (3% of the Eurozone) had public debt around 100% of their GDP. In order to lower their debt levels, the Greek government had increased their taxes and their borrowing levels. Solutions for fixing this issue consisted of stronger countries paying off the Greek debt – however not everyone agreed to such methods. Eventually, the value of the euro went down in the exchange markets and other Eurozone countries such as: Portugal, Italy, Ireland and Spain faced the same problem as Greece. The International Monetary Fund (IMF) and the European Financial Stability Facility (EFSF) donated money to help reduce the amount of debt – however not enough (Krugman, Obstfeld, Melitz, 2011). Since the Eurozone is controlled by monetary rules and does not consist of fiscal union (government collection of tax’s)...
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...the interchanging of goods and services reaching across further and faster beyond national borders, whilst increasing the interconnectedness of different markets and cultures. These economic ties come in the forms of international trade, foreign direct investment and monetary integration, made possible with the complementary increase in the interdependence of international financial markets. With further liberalization and deregulation, financial market interdependence grew in momentum alongside the worldwide capital mobilization. This growing interconnectedness of all the world financial markets and the degree of their interdependence have themselves created a subject of substantial interest among economists. The recent global financial crisis has only elevated this interest further, as the impact of U.S. subprime crises on the world economies have provided evidence of global financial markets interdependence. Many international stock markets, for example, experienced their worst abrupt declines in their history with drops of around 10%, triggered moments after the collapse of Lehman Brothers hit the U.S. financial markets. Even the Bursa Malaysia KLCI was not spared, dropping to its lowest point in...
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...| Asian Crisis of 1997 | | | Prepared by:Azra Becirovic and Sanela Bilalic | | April 21, 2012 | Long before Asian financial crisis has started, South Korea, Thailand, Indonesia, and Malaysia had an increasing economic performance; economy was fast growing, saving rates were high, and inflation low. Turning point in Asian economy was 2 July 1997, the day when Thai Baht fell around 20 % against the $US. “It all began in Thailand’ summarizes the conventional explanation of the early stages of the crisis.” (Hill, p.3) How it all began, what factors caused the crisis, what segments were affected the most, what was the backup plan, and what policies should have been taken to prevent the crisis are the points that this paper will cover. First and Second-Generation Models According to 1996 annual report of Bank for International Settlements (BIS), pre-crisis fundamentals exhibit economic performance of Asian countries. They’ve experienced moderate inflation rates of about 6%, high savings rate of 32%, and trade openness indicators of 39%. Table 1: East Asian Economic Conditions Before Crisis Although accounting and macroeconomic analytics have failed to foreseen the currency crisis, which is inevitable, first and second-generation models explain us was it due to weakening macroeconomic fundamentals or financial contagion. In accordance to first-generation model developed by Krugman 1979, market-speculative movements, in response to policies, are incompatible...
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...SAMPLE COPY RESEARCH PROPOSAL PROPOSED RESEARCH TITLE: AN INVESTIGATION INTO THE DOWNWARD TREND IN GLOBAL STOCK MARKETS: A CASE STUDY OF THE NIGERIAN STOCK MARKET RESEARCH BRIEF The history of stock trading and trading associations can be traced as far back as the 11th century when Jewish and Muslim merchants set up trade associations. After centuries of evolution, stock markets have become the symbol of commerce in the modern world. It operates in various countries and trades a range of securities. The world stock market capitalisation is estimated to be about $ 36.6 Trillion. The stock market has various functions such as capital mobilisation, investing opportunities, risk distribution etc. The major stock exchanges in the world today include New York Stock Exchange, London Stock Exchange, Frankfurt Stock Exchange, Italian Stock Exchange, Hong Kong Stock Exchange and Tokyo Stock Exchange. There have been various stock market crashes in the past such as the Wall Street crash of 1929, the crash of 1973/74, the 1987 crash; called black Monday, the dotcom bubble of 2000 and the more recent crash in 2008 caused by the subprime mortgage crisis in America. The economic crisis of 2008 which originated in America spread to various economies in the world and their stock markets were affected. It reduced the value of stocks around the world by as much as 41% and affected both major and emerging stock markets. The Nigerian stock market is an emerging market in Africa. After...
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...possibility of financial collapse and a currency crisis, they asked for a rescue and they received a $10.5 billion package funded by the International Monetary Fund (IMF), World Bank, EU, and several countries in the region. After that, it talks about the possibility that could help Latvia to restore a sustainable growth. Which are either Devalue the national currency or maintain the peg and attempt an “internal devaluation”. This case describes Latvia's transition from a Soviet republic into an EU member, its economic boom and subsequent bust in 2008, and its policy response. After implementing significant economic and political reforms in order to qualify for EU membership in 2004, Latvia had turned its sights toward joining the single-currency eurozone, pegging its currency to the euro in 2005 as a step toward that goal. From 2000 to 2007, Latvia achieved faster GDP growth than any EU state. However, when large inflows of capital suddenly dried up in 2008, Latvia had to obtain a financial rescue package from the IMF, World Bank, EU, and several regional countries in order to avoid a full-blown financial and currency crisis. Latvia then adopted an aggressive economic adjustment program centered on maintaining its currency peg, which meant competitiveness would have to be restored by reducing domestic prices, wages, and public expenditures in order to drive down the real exchange rate. Latvia's policy program and initial results To study economic adjustment under a fixed exchange...
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...Understanding Financial Crises: Causes, Consequences, and Policy Responses Stijn Claessens, M. Ayhan Kose, Luc Laeven, and Fabián Valencia By now, the tectonic damage left by the global financial crisis of 2007-09 has been well documented. World per capita output, which typically expands by about 2.2 percent annually, contracted by 1.8 percent in 2009, the largest contraction the global economy experienced since World War II. During the crisis, markets around the world experienced colossal disruptions in asset and credit markets, massive erosions of wealth, and unprecedented numbers of bankruptcies. Five years after the crisis began, its lingering effects are still all too visible in advanced countries and emerging markets alike: the global recession left in its wake a worldwide increase of 30 million in the number of people unemployed. These are painful reminders of why there is a need to improve our understanding of financial crises. This book serves this purpose by bringing together a number of innovative studies on the causes and consequences of financial crises and policy responses to them. Although there is a rich literature on financial crises, there has been no publication since the recent financial crisis providing in one place a broad overview of this research and distilling its policy lessons. The book fills this critical gap. It covers a wide range of crises, including banking, balance-of-payments, and sovereign debt crises. It reviews the typical patterns prior to...
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...The Crisis Scenario around the British Pound in 1992 By the time the United Kingdom joined the European Exchange Rate Mechanism (ERM) in October 1990, it was already living a severe economic recession. A drop in industrial productivity and high levels of unemployment struck the nation after the economic growth of the 1980’s (Table 1 and 2). Table 1 – Unemployment Rate in UK in % Source: Office for National Statistics (UK) Table 2 – Industrial Production in UK: Percentage change year-over-year Source: www.tradingeconomics.com During the prosper economic period of the 1980’s there was strong private investment on household, meaning that the mortgage credit rose significantly. In the beginning of the 1990’s the level of private debt was unbearable (Graph 1). Graph 1 - Debt to income ratio Source: Bank of England High rates of unemployment, high private debt and lack of macroeconomic surveillance tools have been pointed out as the main reasons for the economic recession of the early 1990’s. A sharper control over macroeconomic policies as well as an effective control of inflation and the defense of competitiveness of the sterling within Europe was some of the goals the British government aimed at by joining the ERM. A central exchange rate for each participating currency was established against the ECU, the artificial unit of account that set the pillars for the Euro currency. In practice, the participating currencies where actually pegged to the German...
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...Table of Contens Introduction 2 1. Foundation of Euro Zone 2 1.1. Background 2 1.2. Optimum Currency Area 3 1.3. Is Europe an Optimum Currency Area? 5 2. Account imbalance in Eurozone 6 2.1. Captial inflow from outside of eurozone 7 2.2. Bond interest rate convergence after eurozone introduction, it increase raising capital of periphery countries. 10 2.3. Price and unit labor cost increase in periphery countries -> competitiveness loss 11 3. Lehman Brothers 14 3.1. Reasons for Bankruptcy 14 3.2. LEVERAGE 15 3.3. LIQUIDITY 15 3.4. LOSSES 15 3.5. Final words 16 4. Greece Financial Crisis 16 4.1. Current Greece Financial Crisis 16 4.2. Greece before Financial Crisis 18 4.3. Industry 19 4.4. Tax Evasion 20 4.5. Populism and Corruption 22 5. Conclusion 23 5.1. Fundamental defect in the euro area – The impossible of independent monetary policy worsen the Economic Crisis of Europe. 23 5.2 Fundamental defect in the euro area – The Eurozone, which was established without financial alliance makes the financial crisis to the banking crisis. 26 REFERNECES 28 Introduction In June, whole world paid attention to Greek economic crisis. Greece, had undergone crisis because of financial crisis from United States since 2008, has evaded a default with two times of relief loans from European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF). But Greece announced that they couldn’t pay back the loan to IMF...
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...period of independency and the shifting to market economy. The country growth was very fast until 2008. In December 2008, facing the possibility of financial collapse and a currency crisis, they asked for a rescue and they received a $10.5 billion package funded by the International Monetary Fund (IMF), World Bank, EU, and several countries in the region. After that, it talks about the possibility that could help Latvia to restore a sustainable growth. Which are either Devalue the national currency or maintain the peg and attempt an “internal devaluation”. Executive Summary 1. To study economic adjustment under a fixed exchange rate system 1. Explore the meaning of a "sudden stop" in capital flows and causes of Latvia's economic boom and busts. 2. Assess the tradeoffs involved in internal and external devaluation in the Eurozone. 3. Consider historical, political, economic, and other factors that influenced Latvia's policy decisions and their outcomes. 4. Predict the long-term impact of Latvia's policy decisions during the crisis. Contents Introduction 1 Executive Summary 2 Analysis 4 Analysis 1) Historical, political, economic, and other factors that influenced Latvia's policy decisions and their outcomes (Learning objective# 5) | 2) Problems and the crisis and its causes (Learning objective #1, #2) | 3) Possible Salutations (Learning objective #3) | 4) Suggestion of a solution and explanation of the solution in the short...
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