Impact of Global Crisis on a Country BTEC HND Diploma

1. Determining difference between Recession and Depression

2 Impact of global crisis on UK

The impacts of global crisis on UK economy, which has threatened the economic conditions as inviting inflation, recession, etc. have become serious issues for the government to sort out (Lin and Ye, 2017). Therefore, during the phase of Global financial crisis, which damages the national economy and has affected the national financial conditions, such as:

• shortage of liquidity in banks and financial institutions led the credit crunch.
• The financial instability reflected in fall of consumer business and confidence.
• The global recession impacts trade practices of countries, which reduces exports and reciprocally increases imports.
• The GDP rate of nation has been falling due to Fiscal austerity.

3. Impacts of Credit Crunch over economies

There has been various impacts of credit crunch on the economies of several countries; the main reasons behind among such issues were.

• The rise in the rate of interest leads to the sudden shortage of funds in the banks. For instance, 15% of the interest was in UK in 1992.
• The influence of governmental parties in controlling the money (Guerrieri and Lorenzoni, 2017).
• There has been reduction of funds in the capital market.

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4. Business which will not be affected by the economic downturn

There are various organisation that are not being affected by the global crunch in UK, such as Lehman Brothers, The Pier, MFI, Land of Leather, and Ilva; these are the retail industries. It is because they had reduced the consumers credit down. In relation to transport organisation British Airways, it has the better budgeting techniques on which credit crunch does not bother them (UK recession: winners and losers, 2010).

REFERENCES

• Guerrieri, V. and Lorenzoni, G., 2017. Credit crises, precautionary savings, and the liquidity trap. The Quarterly Journal of Economics. 132(3). pp. 1427-1467.
• Lin, S. and Ye, H., 2017. Foreign Direct Investment, Trade Credit, and Transmission of Global Liquidity Shocks: Evidence from Chinese Manufacturing Firms. The Review of Financial Studies. 31(1). pp. 206-238.
• Schwaab, B., Koopman, S. J. and Lucas, A., 2017. Global credit risk: World, country and industry factors. Journal of Applied Econometrics. 32(2). pp. 296-317.

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