A Geographical Analysis of Global Financial Crisis within Core vs Periphery
Added on 2020-02-05
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A Geographical Analysis of Globalfinancial crisis within Core vs Periphery1
TABLE OF CONTENTSCHAPTER -1 INTRODUCTION ...................................................................................................41.1 Background............................................................................................................................41.2 Problem statement..................................................................................................................51.3 Research aim..........................................................................................................................51.4 Research objectives................................................................................................................51.5 Research questions.................................................................................................................61.6 Significance of research.........................................................................................................61.7 Dissertation structure.............................................................................................................6CHAPTER- 2 LITERATURE REVIEW ........................................................................................82.1 Introduction............................................................................................................................82.2 Concept of global financial crisis..........................................................................................82.3 Impact of global financial crisis on core countries & periphery countries............................92.4 Recovery from global financial crisis for core countries & peripheral countries................102.5 Comparison of economic stability post and pre-crisis for the core and peripheral countries....................................................................................................................................................112.6 Dependency between two sets of economies.......................................................................12CHAPTER- 3 RESEARCH METHODOLOGY ..........................................................................133.1 Introduction..........................................................................................................................133.2 Research philosophy............................................................................................................133.3 Research approach ..............................................................................................................133.4 Research methods ...............................................................................................................143.5 Data collection.....................................................................................................................143.6 Data analysis .......................................................................................................................153.7 Reliability and validity.........................................................................................................153.8 Ethical consideration............................................................................................................163.6 Research limitation..............................................................................................................16CHAPTER- 4 DATA ANALYSIS AND FINDINGS ..................................................................184.1 Introduction..........................................................................................................................184.2 Quantitative analysis............................................................................................................18CHAPTER- 5 RECOMMENDATION AND CONCLUSION ....................................................335.1 Conclusion...........................................................................................................................335.2 Recommendation.................................................................................................................332
REFERENCES..............................................................................................................................343
CHAPTER -1 INTRODUCTION 1.1 BackgroundThe economic downturn of 2007- 2008 that is also referred to as global financial crisis.Further 2008 financial crisis is regarded as worst financial crisis since the great depression of1930s. It started in the year 2007 with the crisis in subprime mortgage market within USA aswell as developed into fuller down international banking crisis along with the collapse ofinvestment bank Lehman Brothers on September 15th 2008. Greater risk that is being taken bybank like Lehman Brothers assisted in magnifying the financial influence globally. The crisiswas being followed by global economic downturn, the great recession which is considered as theterm that demonstrates sharper decline within economic activity during late 2000s. It isconsidered as the the largest downturn since Great depression (Hale and Obstfeld, 2016). Theconcept of great recession is applicable to US recession officially that lasts from December 2007to June 2009. The economic slump started when the US housing market went from boom to bustand greater amount of mortgage backed securities as well as derivatives have lost theirsignificant value. During boom in American housing in the mid-2000s, financial institutions began towardsmarketing backed securities as well as sophisticated derivative products at unprecedented levels.However, the market of real estate collapsed in the year 2007. Such securities declined in thevalue, the solvency leveraged the banks as well as financial organizations within US as well asEurope. Although, the global economy was feeling grip of a credit crisis which has beenunfolding since 2007, things have emerged with the bankruptcy of Lehman brothers, thecountry's fourth largest investment bank. Because of great recession, US has alone shed morethan 7.5 million jobs which has resulted in causing unemployment rate to double. Moreover,American households lost $16 trillion of the net worth as a result of stock market plunge. Wheninvestigation was being carried out in relation with the causes of financial crisis, it has beendetermined that role of interest is major (Gilpin, 2016). It has been argued that the credit ratingagencies as well as investors have failed to price the risk in an accurate manner which isassociated with mortgage relating financial products. Along with this, government does notadjust the regulatory practices for addressing financial markets of 21st century. 4
Present research dissertation will assess the relevance of dependency theory in explainingthe severity of impact of Great Recession of 2007-08 on peripheral countries. This has been asevere crisis and has dominated discussions in both academic papers and financial press eversince its inception. The crisis started from private firms’ and banks’ balance sheets andburgeoned into a full-blown housing crisis in the US. It has surged across national boundariesdue to strong financial and trade linkages with rest of the world (including both core andperipheral countries), wiping out economic progress in many Low-income countries of recentyears. It is important to ascertain if these countries would be better by following the restrictionsto trade and capital flows proposed by the dependency theory. 1.2 Problem statementThere is greater dependency of periphery nation on the core countries. This is consideredas the major issue. Though small countries are not directly involved in making investment butthis is being carried out by the core countries (Crescenzi, Luca and Milio, 2016). As a reason oftheir dependency, there is the major issue that is being faced by country which affects thefinancial stability of small nations to a high extent. Although, developed countries have potentialto cope up with such situation but there is lack of ability in the underdeveloped nations toovercome with these conditions. 1.3 Research aimMain aim of present thesis is To carry out geographical analysis of global financial crisis withinCore vs. Periphery. 1.4 Research objectivesThe objectives of present dissertation are:To evaluate the impact of global financial crisis on core and periphery countries To evaluate recovery from global financial crisis for core and peripheral countriesTo compare economic stability post and pre-crisis for the core and peripheral countries To assess the dependency between two set of economies 1.5 Research questionsWhat is the impact of global financial crisis on core and periphery countries?5
How do the core and peripheral countries recover from the global financial crisis?What is the comparison in between economic stability post and pre-crisis for the core andperipheral countries? 1.6 Significance of researchThe present thesis is significant in assessing the Global financial crisis within Core vs.Periphery. Further, it act as an aid in making determination of the stability post and pre-crisis forcore and peripheral countries. The importance of present dissertation is as below:The present thesis will be helpful for the academicians in carrying out PH.D. Moreover, itprovides huge knowledge with respect to feasibility of the subject matter. Along with this, it has high importance for the specialists of economics in gaining in-depth knowledge regarding the financial crisis and its impact on both core and peripherycountries. Present thesis has significance for the thinkers in making reflection of information withrespect to tools that can be executed in the research. 1.7 Dissertation structurePresent dissertation includes various chapters that have suitability in accomplishment ofthe research in an effective manner. Chapters that will be included in present thesis areenumerated in the manner stated as under: Chapter- 1 Introduction: It is the beginning section of dissertation. It includes overviewin relation with the phenomenon in subject. Section demonstrates the framework inrelation to subject in the research. The beginning of chapter covers the overview of topicwhich is required to be researched. This is comprised of in depth knowledge with respectto phenomenon in subject. Along with this, it involves the aim as well as objectives ofresearch which are based on questions related with the subject matter researched study. Chapter- 2 Literature review: It is considered as the crucial section of thesis that includesopinions of various investigators with respect to global financial crisis. The chapter ofliterature review makes evaluation of various information and knowledge that aredemonstrated from the piece of work which is already prevailing in the secondary form of6
sources. Based on the published information, in-depth analysis in relation with the subjectmatter in investigation will be included in this section. Chapter- 3 Research methodology: As per the research objectives, in present thesis,chapter is comprised of tools which can be executed by the analyst while carrying out theinvestigation. Chapter includes tool that can be executed by the investigator. Along withthis, chapter comprises of justification in relation with the choice of specific tool withinresearch. Chapter- 4 Data analysis and findings: This particular chapter involves information thatis collected by the means of sources like primary as well as secondary. The particularchapter will make scrutiny of data that will be gathered. Data analysis as well findingssection are important in the present research as it would act as an aid in attaining theaccurate results of study. Chapter- 5 Conclusion and recommendation: This particular section is the last part ofdissertation which reflects results that are attained through analysis of information. Alongwith this, specific section involves suitable suggestions that can help in resolving theproblem that is related with investigation. 7
CHAPTER- 2 LITERATURE REVIEW 2.1 IntroductionAfter the chapter of introduction, another part of thesis comprises of review of literature.The particular section is considered as an important chapter of thesis. In this, viewpoints ofvarious researchers with respect to subject matter in the research is reflected in an appropriateway. The secondary data is utilized in order to collect plenty of data. It is considered as the basewhich helps in conducting research in future. Through review of literature, the gap withinresearch carried out in past is examined with greater effectiveness. Along with this, chapterincludes evaluating the opinions of investigator in a critical way. Thus, by this, solid academicbase is devised with respect to phenomenon in the investigation. With the present thesis,literature review will involve the impact of global financial crisis on core and peripherycountries. In addition to this, it would involve recovery from global financial crisis by developedand less developed nations2.2 Concept of global financial crisisGlobal financial crisis or international economic catastrophe has begun in July 2007 withthe credit crunch. This is being caused with a loss of confidence by investors of US in the valueof subprime mortgages that is a reason of liquidity crisis. This has led to US federal bankinjecting larger amount of capital into financial markets. By September 2008, the situation ofcrisis got worse as stock market across globe crashed as well as became highly volatile. Theconfidence among customers hit the rock bottom as everyone tightened their belts in fear of whatcan lie ahead. Market related with housing in the US has experienced this situation to a highextent as several owners of house who have taken loans found that they are not able to meet themortgage repayments (Parnreiter, 2016). As the home’s value plummeted, it was being found bythe borrowers that there is presence of negative equity by themselves. With greater borrowersdefaulting on loans, banks were facing situation where the repossessed house as well as landwere worth lesser on the today's market in comparison with the bank that has loaned out inoriginal terms. There has been liquidity crisis in the hands of bank and there is greater difficultyin giving and attaining home loans as a reason of fallout from the subprime lending bubble burst.8
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