...world economists pay much attention to the European economic development. Due to the fact that countries have various financial policies and complex national conditions, it seems that Eurozone faced more difficult challenges when the financial crisis happened (Auditor General of the Swedish National Audit Office, 2010). For instance, the subprime crisis in 2008 shocked the whole European economy. Then in 2009, the sovereign debt crisis happened in Greece made the entire world economic unstable. The Eurozone keeps low rate of inflation for a long time and single currency that can protect their members away from the external economy attack (Otmar, 2008), especially for the weak member countries. Using the Euro may reduce the risks in the cost of borrowing in the financial market, which emerge encourage potential investors to invest capital in their countries (P. Jacques. 2006). However, according to the classical theory of Keynes, financial policy is a decisive tool for stabilizing the economy. It means that government should increase expenditure and reduce the tax to stabilize the economy in recession (ibid). However, it would be unworkable in the Eurozone. If European countries merely carried out the single currency and ignored the unbalanced economic foundation of each country, it may cause conflict between national political institutions and independent financial policy. Despite the fact that since the single currency has been carried out, the Eurozone GDP has increased sharply...
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...impact of the global financial crisis on the world economy A Review of the Literature Foundation Year, BSc (Hons) in Banking and Finance Valikhujaev Voriskhon CA2394385 Group #112 Gerson Lapid, Mirzahidov Mirsodiq November 28, 2009 Abstract Two years have passed since the most severe global financial crisis launched in the USA. During this short period of time a lot has been made by the governments of the countries that suffered from the crisis. Yet, it is still expected that they need to implement more in order to eradicate the negative impacts from the crisis. Only the time will show which country or countries really succeeded in overcoming the crisis and which still need to learn. This paper focuses on how the crisis started, discusses its the main causes, analyses what made it spread to other countries and how much it cost to countries involved in international trading. The impact of the global financial crisis on the world economy A Review of the Litearture The beginning of the 21st century was marked by the start of one of the severest financial crisis that affected dramatically almost all countries of the world. Launched in the USA, in 2008 due to the failure of Lehman Brothers investment bank, it spread out quickly to other countries destroying their economies and national well-beings. For...
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...impact of real interest rate on national saving in five Association of Southeast Asian Nations (ASEAN) of Indonesia, Malaysia, the Philippines, Singapore and Thailand. We analyze impact real interest rate to nation saving for ASEAN starting 1991-2013. Through an analysis from Excel, real interest rate is found to have significant impact on national saving during different stage of economic. Extensions using a graph reveal the impact of real interest rate in ASEAN-5 and thus mainly reflect heightened concerns to national savings amid the Asian financial crisis and the global financial crisis. Keywords: real interest rate, national saving, financial crisis 1.0 Introduction The world’s average saving rate has been declining since the first oil shock and through the early 1990s. However this trend conceals a large and increasing dispersion of saving rates, particularly among developing countries. The large heterogeneity in saving behavior is associated to country and time differences in levels of development, growth performance, and fiscal and financial policies. The level of real interest rates has once again become the focus of policy makers' concerned. To understanding the response of national saving to changes in interest rates is central to many issues in economic policy. For example, a reduction in the budget deficit would probably cause interest rates to decline. If personal saving declined as a result, the overall increase in national saving would be less than the...
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...An Analysis of The Effects of the Financial Crisis and Its follow-up events on China and United States and the reactions of both countries Ruichen,Wang University of Illinois, Urbana-Champaign Introduction The recent economic world has been focusing on the Financial Crisis started in 2007 for a long time. It is considered as the worst financial crisis since the Great Depression of the 1930s by many economists and its impact spreads through all the continents except Antarctica (Reuters, 2009).There is no final assertion about if the crisis has ended, but it is still important for us to understand the economic knowledge about it. As the two largest economies in the world, China and United States are the most suitable examples for us to analyze (International monetary Fund, 2011). The reactions of the two involve various macroeconomic theories which are worth our attention. The interactions between the two make us better understand the two economy model and allow us to apply it in more events in the future. What is the most crucial is that the analysis of the Crisis will help us avoid such tragedies in the future. In this essay, this issue will be divided into the 11 parts and will be carefully analyzed. Through detailed narrations of background information, careful analysis of the government policies during the Crisis and their results, and objective comparison of these policies, an assertion of how to avoid and deal with future recessions have been achieved stating that ...
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...Chinese Yuan The Chinese national economy is probably the most powerful nowadays. At least, it is the main antagonist to the American economy. A lot of experts tend to call it as the main driver of renewal of the world’s economy after the global financial crisis. A reasonable question is what the preconditions of such powerful status are. In our opinion, these preconditions are the following. First of all, it is cheap labor force. Moreover, the country has a lot of labor force, more than any other country in the world. Because of the cheap labor force the country’s products are quite cheap on the international market. That is why it is not surprising that export plays a great role in the country’s economy. Cheap labor force is not the only reason for the competitiveness of the Chinese products. Cheap Yuan is another reason, but about it we are going to talk below. Some additional information about the national economy of China can be got from the following quote. “China's economy is huge and expanding rapidly. In the last 30 years, the rate of Chinese economic growth has been almost miraculous, averaging 8 percent growth in Gross Domestic Product (GDP) per annum. The economy has grown more than 10 times during that period, with Chinese GDP reaching 3.42 trillion US dollars in 2007. China already has the biggest economy after the United States and most analysts predict China will become the largest economy in the world this century” (The Chinese Economy). As it has been already...
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...Publishers, Inc. ICELAND'S FINANCIAL CRISIS* James K. Jackson ABSTRACT On November 19, 2008, Iceland and the Intemational Monetary Fund (IMF) finalized an agreement on a $6 billion economic stabilization program supported by a $2.1 billion loan from the IMF. Following the IMF decision, Denmark, Finland, Norway, and Sweden agreed to provide an additional $2.5 billion. Iceland's banking system had collapsed as a culmination of a series of decisions the banks made that left them highly exposed to disruptions in financial markets. The collapse of the banks also raises questions for U.S. leaders and others about supervising banks that operate across national borders, especially as it becomes increasingly difficult to distinguish the limits of domestic financial markets. Such supervision is important for banks that are headquartered in small economies, but operate across national borders. If such banks become so overexposed in foreign markets that a financial disruption threatens the solvency of the banks, the collapse of the banks can overwhelm domestic credit markets and outstrip the ability of the central bank to serve as the lender of last resort. This report will be updated as wananted by events. BACKGROUND Iceland [1] is the smallest economy within the Organization for Economic Cooperation and Development (OECD) with a gross domestic product (GDP) in 2007 of about $11.8 billion, as indicated in Table 1. Historically, Iceland's economy has been based on marine and energy...
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...the economic crisis? Loh Hu 2/18/2013 In this paper, I examine how the theory of technological innovation waves could contribute to solving the ongoing economic crisis. Primarily, my stance remains that innovation in itself is insufficient to solve the economic crisis unless there exists a matching techno-economic paradigm where national, supranational and global efforts are coordinated for a full deployment of technological revolution. Can innovation solve the economic crisis? Background There has been a wide international debate on the causes and possible solutions to the economic crisis that emerged in 2007 – 2008 (Ranga and Etzkowitz 2012). The economic crisis sweeps across the global financial system rapidly and furiously as markets are globally integrated (Gore 2010). Hence, the responses to the global economic crisis are not only enclosed within a nation’s or a coalition government’s approach. Rather, a global coordinated response is warranted as well. Economic stimulus packages addressing short-term and long-term problems have been adopted in most countries as well as the European Commission (Ranga and Etzkowitz 2012). Internationally, the United States of America and European Union have recently been discussing on a free-trade agreement to remove trading barriers between the two important economic powers and boost the economies (BBC News Business 2013). Globally, the G-20 group of major economies have considered proposals on international financial regulation...
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...the euro-zone crisis – causes, the crisis and reformation policies (with special reference to greece) the euro-zone ‘The Eurozone’ is the nickname commonly used to describe the member states that use the EU’s single currency, the Euro. The idea of creating a single currency for the European Community was first mentioned in the 1970 Werner report, which led to the establishing of the European Monetary System (EMS), the forerunner of the Economic and Monetary Union (EMU). The Maastricht Treaty (1992) made EMU a part of EU law and set out a plan to introduce the single currency (the Euro) by 1999. The Maastricht Treaty also established certain budgetary and monetary rules for countries wishing to join the EMU (known as the convergence criteria). In 1998, 11 member states (Germany, France, Italy, Belgium, Luxembourg, the Netherlands, Spain, Portugal, Ireland, Austria and Finland) undertook the final stage of EMU when they adopted a single exchange rate, which was set by the European Central Bank (Britain, Sweden and Denmark negotiated an opt-out from this final states of EMU). The new Euro notes and coins were launched on 1 January 2002. There are currently 16 EU states in the Eurozone. Greece joined the initial 11 members in 2001, Slovenia joined in 2007, Cyprus and Malta in 2008, and Slovakia joined in 2009. Estonia is due to join the Eurozone in 2011. All future members of the EU must adopt the Euro when they fulfil the convergence criteria. Economic and Monetary Union...
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...GROUP PROJECT Financial Crises: Asia 1997 and Global Recession 2008 Group members: Professor: Vesna Plakalovic Faris Njemcevic Ibrahim Music Avdo Halilovic Sabit Ceho 1. Explain both crises in your own words As for the Asian crisis which has occurred in year 1997/1998 we can say that something that looked really small, and not important has impacted most of the Asian countries but the World as well. As for the crisis beginning, we can say that it has begun in the Thailand. Problems started in the USA where was a lot of loans and credits that lead towards the collapse and bankruptcy of most of the banks and financial institutions in the USA. Looking for the investment and good return of investments, Americans banks and investors have decided that the Middle East and Asian countries are perfect investing area. When American companies started to invest into Asian countries like Thailand ,which has really low GDP and standard of life, big money income into poor countries it has only one possible outcome. GDP in Thailand and other surrounding countries started to appreciate really fast which was almost uncontrollable. Problem was that many experts have noticed and put a warning on ,was that GDP should appreciate but on a stabile level, their thesis was that GDP of poor countries and countries where American financial institutions...
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...2007-2009 financial crisis ? 1. Global financial crisis 2007 to 2009 1.1 Background The 2007-2009 financial crisis started as a sub-prime crisis in the United States (US). The Wall Street, driven for higher profits and low federal fund rate in home ownership began lending to sub-primes (Whalley et al, 2009). The mortgage loans were then re-packaged into financial instruments and sold to investors globally. When the housing prices declined in 2006, sub-primes defaulted on their mortgage loans as the values of their houses depreciated. These non-performing loans grew in sizes and led to the collapse of the mortgage loan market and collateralised debt obligations, leaving banks and financial institutions with lower net worth (Bianco, 2008). Due to the interconnected economies, the impact of the crisis spread beyond the US and resulted in a global financial crisis. | | | 1. | | | 2. | | | 3. | | | 4. | | | 5. | | | | | | | | | | 1. | | | | | | | 1. | | | 2. | | | 3. | | | | | | GDP: GDP growth (%): Considering that China’s GDP was only a third of the USA’s, its fiscal stimulus package size was significant in comparison to USA and UK, where the stimulus package were only 6% and 1.4% of their respective GDP (Fleet, 2010).. Hu Jintao committed at the G20 summit meeting held in London in November 2008 to provide international financial stability...
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...competitiveness within the post-crisis economy. Causes, evoiutions and possibie innovative soiutions to fight against the undesirable effects of the economic crisis Laura Mariana CISMAÇ West University Timisoara laura.cismas@feaa.uvt.ro Ruxandra Ioana PITORAC West University Timiçoara ruxandrapitorac@gmail.com Abstract. The main objective of this paper is to highlight the need for promoting a new vision regarding competitiveness mostly in the context of amplifying the effects and the complexity of the nature of crisis manifested now on the international level (economic, environment, demographic, value and moral etc.). The economic thinking pays increased attention to the issues related to economic crisis, as well as the development of theories that give satisfactory answers about the causes and, especially, the solutions to the crisis. Using scientific observation and comparative case study as research methods, this paper aims to make a theoretical critical review of the theories regarding the causes of economic crisis over time and to identify and analyze some anti-crisis policies. Keywords: economic competitiveness. crisis; macroeconomic theories; anti-crisis policies; JEL Classification: E30, GOL REL Classification: 81, 8M. 24 Laura Mariana Cisma§, Ruxandra ioana Pitorac Introduction Theoretical controversy on crises has augmented over the last two decades with a special accent on system and stmcture crises, as well as on the crisis of intemational economic relations...
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...TRENDS IN NATIONAL INCOME SINCE 1950/51: The National income of India has shown progressive growth since 1950 till 2012 except during a few periods of decline in performance. Growth rate during the 1950’s averaged to around 3.5% until a deceleration during the period post 1965. The next decline in economic performance was due to oil shocks and currency devaluation prior to New Economic Policy of 1991. Apart from this the economic performance was affected by crises such as the Asian Financial Crisis and the global financial crisis of 2008. During the period of 1965-66, the economic performance deteriorated and there was a huge trade deficit. Subsequently there was currency devaluation to the extent of 56.75%. This was due to reasons like the war with Pakistan and China and the drought that hit the country. The first oil shock in 1973 resulted in a decline in economic performance but was absorbed by buoyant exports. The second oil shock of 1979 was more severe and the government has to resort to heavy borrowing. This was further aggravated by the Gulf war in 1990-91. Despite the recovery in 2009-2010 and 2010-11, the economic performance on the country deteriorated in 2011-12 due to adverse external environmental factors and low domestic investment. In addition to observing the trend in national income, it is also necessary to look at the structural shift of the economy over the years. The Indian economy has shifted from an agrarian economy with a decline from 57% in 1950-51...
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...has the Greek economy suffered as a result of the economic breakdown? Over the past decade, the Greek government has been relying heavily on foreign aid and the reliance on financing from international capital markets resulted to an accumulation in national debt. The interference of fiscal policy by the injection of money in the economy and the increase of money supply and the encouragement of consumption has been a huge factor in contributing to the overall outcome. I. Introduction According to many economists, the financial crisis of the late 2000s is considered to be the most severe financial crisis since the great depression of the 1930s. A downfall in the United States banking system was the trigger behind the formation of the crisis, which resulted in the breakdown of large financial institutions. The government was forced to bailout banks as a result and similarly the stock market faced a huge blow, not only in the United States but all around the entire globe. Well into 2006, the United States housing bubble flopped, resulting in the decrease in the values of securities causing the real estate pricing to vastly decline, which similarly resulted in the collapse of huge financial institutions all around the world. Foreign direct investment suffered a huge blow as damaged investor confidence and the decline in credit and security availability have contributed to the major collapse of the stock market. The United States is considered to have an economy that acts as...
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...Financial Crisis in the European Union: The Cases of Greece and Ireland Sara F. Taylor Thesis submitted to the faculty of the Virginia Polytechnic Institute and State University in partial fulfillment of the requirements for the degree of Master of Arts in Political Science Scott G. Nelson, Chair Karen M. Hult Deborah J. Milly September 7, 2011 Blacksburg, Virginia Keywords: EUROPEAN UNION, EUROZONE, GREECE FINANCIAL CRISIS, IRELAND BANKING CRISIS, EUROPEAN CENTRAL BANK Copyright 2011 Sara F. Taylor Financial Crisis in the European Union: The Cases of Greece and Ireland Sara Frances Taylor ABSTRACT The 2008 eurozone financial crisis has only worsened as of summer 2011 raising questions about the economic future of the eurozone and sending shock waves through economies around the world. Greece was the first state to receive a bailout from the European Union and the International Monetary Fund, surprisingly followed only six months later by Ireland. The goal of this thesis is to analyze the challenges posed to smaller, weaker economies within the eurozone, specifically Greece and Ireland, since the recent eurozone financial crisis. This study is based on the experiences of both Greece and Ireland as very different members of the single currency. How and why did these states meet the criteria for euro convergence? To what extent was there support for the euro in both countries in the past? To what extent is there support today after the near collapse...
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...Globalization means the coming together of different societies and economies via cross border flow of ideas, finances, capital, information, technologies, goods and services. The cross border assimilation can be social, economic, cultural, or political. But most of the people fear cultural and social assimilation as they believe this would have a negative impact on the existing culture of their society. Globalization therefore has mostly narrowed down to economic integration and this mainly happens through three channels; flow of finance, trade of goods and services and capital movement. Globalization is a term that includes a wide range of social and economic variations. It encompasses topics like the cultural changes, economics, finance trends, and global market expansion. There are positive and negative effects of globalization - it all comes as a package. Globalization helps in creating new markets and wealth, at the same time it is responsible for extensive suffering, disorder, and unrest. The great financial crisis that just happened is the biggest example of how negative globalization can turn. It clearly reveals the dangers of an unstable, deregulated, global economy. At the same time, this gave rise to important global initiatives, striving towards betterment. Globalization is a factor responsible for both repression and the social boom. What happens when there is a growing integration of economies across the globe? Majorly there have been positive impacts of this...
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