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The Global Economic Crisis And Recovery: Lessons To Be Learned

1146 words - 5 pages

Executive summary:Financial market operation has been intervened by several financial over years. The most important ones were the great depression in 1929-30, the 1970s inflation crises, the banking crises in the 1990s and current economic recession.In 2007, the current financial crisis emerged. However, its roots can be traced back much earlier than 2007. Many experts have called the current one, the toughest and the biggest crisis as it has not only has affected the banking sectors but has affected whole economy.Here, I have discussed the causes of the global financial crisis and its impacts on the global economy. Considering that this recession has been one of the toughest periods of history to most of the modern financial markets, a number of significant steps have been taken by the governments of various countries to control it; however, the crisis is still there and the countries must act urgently. Although it may take a great amount of time before the financial markets returns to its normal conditions, I believe we need fundamental changes in the structure of our economy and its operations with an appropriate regulatory mechanism to make sure that crisis of such proportions do not occur in the future again.Importance of the financial sector from an economic growth perspectiveFinance is the backbone of any country or organization; however, its role in the growth of the economic has always been debated. Some of economists believe that it has no contribution in the economic growth and others suggest that it is the key determinant in economic growth.Considering that the economy's growth without development is worthless, today's economists believe that concept of sustainable development and achieving higher living standards is the most important issue. However, there are lots of debates about the role of financial sector in economic growthTwo key factors influence economic growth are:•Technological change•Capital accumulationTechnological change is the development of new goods and of better ways of producing goods and services.Capital accumulation is the growth of capital resources.Some of the economists strongly believe that the financial sector does not have any role in economic growth and on the other hand others say, financial sectors are the "pioneers on development of economics". Joan Robinson (1952 p.86) states, "where enterprise leads finance follows", therefore he has totally removed the financial sectors from the list of factors that control the economic growth. On the other hand, a group of economists argue that financial market helps the growth of economy.However, we must note that the financial systems in the developing countries has different issues which stop them in operating efficiently. Governments of developing countries often use their own financial system to direct credit or to set very low interest loans for certain entities.Income distribution is one of the indicators of economic growth; therefore, it is...

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