Global Economic Crisis and Its Impact
Dream Dare Win
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GLOBAL ECONOMIC CRISIS AND ITS IMPACT ON INDIA
RAJYA SABHA SECRETARIAT NEW DELHI JUNE 2009
Dream Dare Win
1
www.jeywin.com
Dream Dare Win
www.jeywin.com
GLOBAL ECONOMIC CRISIS AND ITS IMPACT ON INDIA
RESEARCH UNIT (LARRDIS) RAJYA SABHA SECRETARIAT NEW DELHI JUNE 2009
Dream Dare Win
2
www.jeywin.com
Dream Dare Win
www.jeywin.com
Occasional Paper Series (4)
This paper is based on published sources which have been cited appropriately. The authenticity of the information given or the views and opinion expressed herein rest with the respective sources, not with the Rajya Sabha Secretariat.
Dream Dare Win
3
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Dream Dare Win
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CONTENTS
PAGE NOS. Preface I Introduction II Backdrop of the crisis (i) (ii) (iii) (iv) Boom in World Economy and Thriving Asset Prices Growth in US Economy - Interest Rate Cut and Deregulation Rapid increase in credit Failure of the US Leadership in Anticipating the Crisis III Sub-prime mortgage Securitization and Repackaging of Loans Excessive Leverage Misleading judgements of the Credit Rating Organisations Mismatch between Financial Innovation and Regulation Imperfect Understanding of the Implications of Derivative Products Fair value accounting rules Typical characteristics of US financial system Failure of Global Corporate Governance Complex Interplay of multiple factors IV 3 3-4 4 4 1-2
Genesis and development of the crisis (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) 5 5-7 7-8 8-9 9-10 10-11 11-12 12 12-13 13
Varied Dimensions of the Crisis (i) Global spread of the crisis (ii) Financial globalization (iii) Decline in the Credibility of International Financial Organizations (iv) State Capitalism and Protectionism (v) Credit Crunch (vi) Crisis of Confidence and Credibility in the Financial Market (vii) Failure in addressing global issues such as Climate Change 14-15 15 15-16 16 17 17-18 18
www.jeywin.com
GLOBAL ECONOMIC CRISIS AND ITS IMPACT ON INDIA
RAJYA SABHA SECRETARIAT NEW DELHI JUNE 2009
Dream Dare Win
1
www.jeywin.com
Dream Dare Win
www.jeywin.com
GLOBAL ECONOMIC CRISIS AND ITS IMPACT ON INDIA
RESEARCH UNIT (LARRDIS) RAJYA SABHA SECRETARIAT NEW DELHI JUNE 2009
Dream Dare Win
2
www.jeywin.com
Dream Dare Win
www.jeywin.com
Occasional Paper Series (4)
This paper is based on published sources which have been cited appropriately. The authenticity of the information given or the views and opinion expressed herein rest with the respective sources, not with the Rajya Sabha Secretariat.
Dream Dare Win
3
www.jeywin.com
Dream Dare Win
www.jeywin.com
CONTENTS
PAGE NOS. Preface I Introduction II Backdrop of the crisis (i) (ii) (iii) (iv) Boom in World Economy and Thriving Asset Prices Growth in US Economy - Interest Rate Cut and Deregulation Rapid increase in credit Failure of the US Leadership in Anticipating the Crisis III Sub-prime mortgage Securitization and Repackaging of Loans Excessive Leverage Misleading judgements of the Credit Rating Organisations Mismatch between Financial Innovation and Regulation Imperfect Understanding of the Implications of Derivative Products Fair value accounting rules Typical characteristics of US financial system Failure of Global Corporate Governance Complex Interplay of multiple factors IV 3 3-4 4 4 1-2
Genesis and development of the crisis (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) 5 5-7 7-8 8-9 9-10 10-11 11-12 12 12-13 13
Varied Dimensions of the Crisis (i) Global spread of the crisis (ii) Financial globalization (iii) Decline in the Credibility of International Financial Organizations (iv) State Capitalism and Protectionism (v) Credit Crunch (vi) Crisis of Confidence and Credibility in the Financial Market (vii) Failure in addressing global issues such as Climate Change 14-15 15 15-16 16 17 17-18 18
References: Global Economic Outlook 2008 “Global Financial Crisis: Analysis and Policy Implications”, Congressional Research Service, Report for Congress, April 3, 2009 42 The Financial Crisis: Impact on and Response by the European Union, Congressional Research Service Report for Congress, USA, March 9, 2009 The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens, The World Bank Policy Note, Newsletter n