...European Debt Crisis and Impacts on Developing Countries STATISTICAL ECONOMIC AND SOCIAL RESEARCH AND TRAINING CENTRE FOR ISLAMIC COUNTRIES (SESRIC) 1 SESRIC REPORTS ON GLOBAL FINANCIAL CRISIS – 9 2011‐2 Issue EUROPEAN DEBT CRISIS AND IMPACTS ON DEVELOPING COUNTRIES July – December 2011 SESRIC Reports on Global Financial Crisis : The financial crisis which started in July 2007, when investors lost their confidence in the mortgage‐ and asset‐based securities in the United States, has deepened during 2008‐2009 with a global reach and affecting a wide range of financial and economic activities and institutions in both developed and developing countries around the world. As the crisis deepened, the governments of major developed and developing countries as well as international financial regulators attempted to take some mitigation actions and coordinate efforts to contain the crisis. Given this state of affairs, the SESRIC has been preparing short reports since May 2009 with the aim of monitoring the developments related to the current global financial crisis at the global, regional and national levels. In particular, these reports focus on the impact of the crisis on the economies of the developing countries, including the OIC Members, and highlight the actions taken by these countries to contain the negative impact of the crisis on their economies...
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...Discussion Paper No. 2009/01 The Financial Crisis of 2008 and the Developing Countries Wim Naudé* January 2009 Abstract Following the financial crisis that broke in the US and other Western economies in late 2008, there is now serious concern about its impact on the developing countries. The world media almost daily reports scenarios of gloom and doom, with many predicting a deep global recession. This paper critically discusses this and concludes that as far as the developing countries are concerned, a bit more optimism may be warranted. Although without doubt there are particular countries that will be adversely affected, there will also be countries that may be less affected, may avoid recession, and may recover sooner than expected. Six major reasons for this conclusion are discussed. Without this resilience in the developing world, prospects for the world’s richer countries would be much bleaker. Finally, some options available to the developing countries for minimizing the impact of the crisis are discussed. The crisis accentuates the urgent need for accelerating financial development in developing countries, both through domestic financial deepening, domestic resource mobilization, and reform of the international financial system. Keywords: financial crisis, developing countries, development finance, financial development JEL classification: F34, F35, G14, O16 Copyright © UNU-WIDER 2009 * UNU-WIDER, Helsinki, Finland, email: wim@wider.unu.edu This study has been prepared...
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...World Bank and IMF are lending institutions that provide funding to developing countries. These developing countries are to use this funding to support projects and/or policies that are designed to fight poverty and other economic concerns. Developing countries such as, Democratic Republic of Congo(DRC) are plagued with poverty, health concerns and lack many of the basic necessities to live. Many question whether the support from these institutions are beneficial or do they actually hinder the development of countries such as DRC. I believe that, developing countries can benefit from the aid the World Bank and IMF can provide them. With the support from the World Bank and IMF they can build hospitals, roads, schools, or put in place reforms to help become a developed country. The DRC once plagued with conflict and civil wars leaving the country in a fragile place. The outlook for the DRC looks promising, they have made significant economic progress since the wars. The World Banks shows that DRC registered a growth rate of 8.5% in 2013 and it also shows that inflation was at 53% in 2009 but it fell to 1% in 2013. The World Bank expects the economy to grow steadily in the medium term at around 7 to 8%.These results are not just from funding from the World Bank but a combination of a change in government structure and also public investments. The country has made great strides in rebuilding the country. The change in the government matrix and the funding from World Bank allowed...
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...Critically examine the relationship between globalisation, inequality and poverty. The term globalisation refers to the process by which the world has become more connected through advancements in technology, transport and communications and resultantly become integrated in many areas of life. For the purposes of this essay, one will be discussing the relationship between primarily economic globalisation, poverty and inequality in what many have referred to as the ‘third wave’ of globalisation, which has been prominent since the 1980s. Advocates of economic globalisation, understood as “the widening, deepening, and speeding up of worldwide interconnectedness” (McGrew in Ravenhill, 2005: 275) suggest that economic advancement through globalisation is a by-product of well-functioning markets; that countries should specialise in line with their comparative advantage; and that countries should practice free trade as a guiding principle. (Wade, 2004a: 184) Still today there exists huge economic inequality both within and between countries, and mass poverty is an issue which is still high on the agenda of world leaders across the globe. Yet data from the World Bank has shown that the number of people living in extreme poverty, of which it classifies as those living on less than $1 per day in Purchasing Power Parity (PPP) has fallen in the last two decades for the first time in 120 years. (Wade, 2004a: 163) The relationship between globalisation, inequality and poverty thus seems to...
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...financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. On the one hand many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial meltdown will affect the livelihoods of almost everyone in an increasingly inter-connected world. The problem could have been avoided, if ideologues supporting the current economics models weren’t so vocal, influential and inconsiderate of others’ viewpoints and concerns. A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world. Furthermore, other weaknesses in the global financial system have surfaced. Some financial products and instruments have become so complex and twisted, that as things start to unravel, trust in the whole system started to fail. The subprime crisis came about in large part because of financial instruments such as securitization where banks would pool their various loans into sellable assets, thus off-loading risky loans onto others. (For banks, millions can be made in money-earning loans, but they are tied up for decades. So they were turned into securities...
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...Role and Importance of BRICS Bank Sudhakar Singh PGPSM 2015 National Institute of Securities Market The ‘BRICs’ acronym, in its most common usage, derives from a report to investors by Goldman Sachs’ analyst Jim O’Neill, signaling the new dynamic that four large countries; Brazil, Russia, India and China, were bringing to the global economy at the beginning of the new millennium. A conclusion advanced in the Goldman Sachs report was that the BRICs should be included in the G7 as their macroeconomic significance increased in the decade to come. From a global investment angle, the world has moved on from there to a wider set of dynamic emerging countries, including a number of fast-growing African nations, as more developing countries find their own way to catch up on growth, resisting world recessionary tendencies (O’Neill 2001 2011). The investor’s world of emerging markets has thus expanded beyond the BRICs, even as questions are raised about the sustainability of growth in the BRICs themselves, with their structural and political challenges and their vulnerability to the uncertainties of global monetary developments. (http://mobile.opendocs.ids.ac.uk/opendocs/handle/123456789/3599#.VemUOn2MgQ0) The grouping was originally known as "BRIC" before the inclusion of South Africa in 2010. The BRICS members are all developing or newly industrialised countries, but they are distinguished by their large, fast-growing economies and significant influence on regional and...
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...According to the United Nations (UN) a developing country is a country with a relatively low standard of living, underdeveloped industrialized base, and moderate to low Human Development Index (HDI). This index is a comparative measure of poverty, literacy, education, life expectancy and other factors for countries worldwide. The index was developed in 1990 by Pakistani and economist Mahbub ul Haq, and has been used since 1993 by the United Nations development program. In order for a country to become a developed nation, it would involve a modern infrastructure, (both physical and institutional), and a move away from low value added sectors such as agriculture and natural resource extraction. Developed countries usually have economic systems based on continuous self-sustaining economic growth and high standards of living unlike that of a developing country. Policies that make an economy open to trade and investment with the rest of the world are needed to sustain economic growth, especially for developing nations. No country in recent decades has achieved economic success in terms of significant increases in living standards for its people, without being opened to the rest of the world. In contrast, trade opening, (along with opening to foreign direct investment), has been an important element for economic success. Opening up their economies to the global economy has been essential in assisting many developing countries to develop comparative advantages in the manufacture of...
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...BRICS BANK - A GLOBAL FINANCIAL INSTITUTION OPENING NEW OPPORTUNITIES FOR THE COUNTRIES AROUND THE WORLD INTRODUCTION 1. In late March 2013, the member countries of the BRICS (Brazil , Russia , India , China and South Africa) agreed to create a global financial institution which they intended to rival the western-dominated banks ( Like IMF and World Bank) by 2014.A new phenomenon has been injected in the tottering physique of the world financial order. It is the Fortaleza declaration of development banking and trade prospects by setting up Brics Bank. Leaders of Brazil, Russia, India, China and South Africa inked a deal, on 15 July in Fortaleza, Brazil, to launch a development bank with an initial $50 billion paid-up capital and a $100 billion monetary reserve. It is seen as a fruition of a multilateral financial diplomacy with the help of the multilateral mechanism and platform, without being cramped by Western pressure and dollar power. 2. In terms of economic function, this bank will provide long-term development aid to developing countries like Bangladesh. The monetary reserve will provide an economic stability fund to help BRICS countries respond to financial emergencies. BRICS Development Bank will help us to borrow cash for development projects, and to better cope with the risks created by international monetary system. 3. This paper will AIM 4. The aim of this paper is to.... BRICS AT A GLANCE 5. BRICS is the acronym for an association...
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...TITLE: IMF POLICY INVOLVEMENT IN THE DEVELOPING COUNTRIES International Monetary Fund’s (IMF) Policy Involvement in the Developing Countries Mohd Hafiz Bin Mohd Hussin Kolej Poly Tech MARA Malaysia ABSTRACT During the last two decades, the focus of IMF involvement in the developing world, and especially in the low income countries, has shifted. IMF involvement became more long term, but also oriented toward policy reform, rather only assisting with a macroeconomic crisis. This paper explores the deficiencies in IMF policy prescription and implementation in the developing countries. The information was collected using a library research where books, journals, articles and online resources were used. The paper further clarifies reasons behind the failure of structural adjustment programs and the danger of neo liberal based economic policies imposed on low-income countries. The research concludes IMF’s enormous financial and political power should be used in the betterment of people in the developing nations. CONTENTS 1. Title page…………………………………………………………………………….…1 2. Abstract…………………………………………………………………………………2 3. Content………………………………………………………………………………….3 4. Introduction……………………………………………………………………………..4-5 5. Argumentation………………………………………………………………………….6-9 6.1. Mismanaged lending and debt crisis in the developing countries………….6 6.2. Counter argument and Refutation………………………………………………7-8 6.3....
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...Impacts on Developing Countries Student’s Name Professor’s Name Institution Dates Page no. 1.0 Origin of financial crisis………………………………………………………………… 3 2.0 causes of the financial crisis …………………………………………………………. 3-4 3.0 Channels of Transmitting Financial crisis ……………………………………………… 4 3.1 Transmission through financial flows ……………………………………….. 4-6 3.2 transmission through trade ……………………………………………………… 6 4.0 responses to the crisis by developing countries ………………………………………. 6 4.1 fiscal stimulation measures ………………………………………………….. 6-7 4.2 money policies ………………………………………………………………….. 7 5.0 reference ………………………………………………………………………………… 8 The Global Financial Crisis and Its Impacts on Developing Countries Origin of Financial Crisis The financial crisis originated form the United States’ economy. In the year 2007 during summer after two Bear Stearns Hedge Funds collapsed resulting to subprime mortgage crisis. This financial crisis reintroduced private defaults, bank failures, massive layoffs and credit crunch to the world. The financial crisis was as a result of too much foreign money from Asian countries like China flowing into the economy of US (Savona, Kirton, & Oldani, 2011). Causes of the Financial Crisis Creation of too much money by the banks had led to the crisis. New money is created when the banks give loans to the public. By giving loans, the banks created a large sums of money during the run up to the financial crisis. Many people had to borrow money from the banks due to availability...
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...sea level is rising, world hunger is increasing and super-storms spawned putting our present and future under a serious threat decreasing the possibility for our children and grandchildren for living in livable cities. At World Economic forum 2014 held in Davos on the 24th & 25th of January 2014, the climate change was at the top of the agenda. “In corporate boardrooms and the offices of CEOs, climate change is a real and present danger. It threatens to disrupt the water supplies and supply chains of companies as diverse as Coca-Cola and ExxonMobil. Rising sea levels and more intense storms put their infrastructure at risk, and the costs will only get worse,” Jim Yong Kim the President of World Bank said. Jim Yong Kim, the 12th President of World Bank called on the government leaders and Institutional investors for a serious act toward the climate change danger and climate mitigation and adaptation projects before it’s too late. “The leaders here in Davos, both from the private sector and from governments, have in their power to act in substantive ways. Now is the time to act for future generations before it is too late.” (Jim Yong Kim, 2014) Kim urged for putting a price on carbon, having financial regulators require companies and financial institutions to assess their exposure to climate related risks and disclose it besides doubling the green bonds which will support efficient energy, renewable energy and carbon emission reduction. (World Bank, 2014) “This is the...
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...Campus Center BACKGROUND PAPER AND TOPIC SUMMARY Third World Debt Executive Summary: The debt problems of developing countries that began in the 1980s still remain a huge burden in the new millennium. Although there have been several initiatives like the Baker Plan, the Brady Plan, and the HIPC Initiative to ease the burdens of those countries, many still experience unsustainable debt. The debt burdens of developing and middle-income countries increased from $500 billion in 1980 to $1 trillion by 1985. By 2000, their debt was about $2 trillion. The debts of HIPC countries increased from $60 billion in 1980 to $190 billion by 1990. Even with relief programs like the HIPC Initiative, 8 countries under the Initiative experienced worsening debt indicators even after reaching their completion points. The consequences of developing countries’ inability to exit from debt payments go beyond the financial level. In addition to economies being hurt, the peoples of developing countries will also feel the affects. The United Nations established the Millennium Development Goals in 2000 that pledged to halve income poverty between 1990 and 2015, but countries like those in Sub-Saharan Africa will most likely not meet this goal. The problems delaying debt relief result from numerous actors. Creditors need to provide additional financing and fulfil their commitments to debtor countries. The Bretton Woods institutions need to speedily and effectively...
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...give manufacturers in various countries the opportunity to expand beyond the domestic market. Trading across national borders increases sales, creates jobs, balances seasonal fluctuations and provides a variety of products and services. As the global economy continues to strengthen, international trade continues to be in demand. 4.2 OBJECTIVES Increases Sales For some businesses, the drop in the value of the dollar increases business internationally. To capture the international market, businesses have launched Internet marketing campaigns and websites targeted at consumers in specific...
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... The IMF and the World Bank have contributed to environmental destruction and provide wide range of inequality to the global economy as a whole. There new enforce policies called structural adjustment policies (SAPs) has...
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...telecommunications and Internet has accentuated these effects creating a truly global village. The observable heterogeneity of the global growth process led to a large body of empirical and theoretical research with the main conclusion that the hypothesis of absolute convergence formerly predicted by growth economists does not hold. That is, not all countries do automatically converge to the same steady state position. As a result, depending on a number of factors, countries would tend to cluster on certain "conditional convergent equilibria". These will depend on essentially the investment rate, human capital endowment, the R&D intensity and integration into world markets. Further, empirical results strongly support the hypothesis that only countries with sufficient abilities to innovate or acquire new technologies are able to converge in terms of their productivity levels and income. Keywords: Globalization, Economic Growth, Innovation Globalization (Cheal, 1997) defines economic globalization as, A process of increasing economic integration between two countries, bringing about the emergence of a global marketplace, or a single world market (p 647). Despite the fact that globalization has been in the making for the past couple of decades. Ever since the emergence of the trans-national trade, the real impacts have come to increase exponentially over the period dating back two or three decades. Osland, (2003) notes that, this boom is attributable to the integration...
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