A COMPARATIVE STUDY OF THE IMPACT OF GFC- 2008 ON SELECTED ECONOMIES AND THEIR MONETARY POLICIES

Abstract

Most of the economies today are contrasted with their geographic, demographic and economic trends. A small turbulence in these economies would leave the economies go in deep troubles. Second great depression which was termed as the global financial crisis 2008 was felt in the mid of September 2008, whose effects were critically evaluated by the economists. The growth in various sectors dwindled, causing huge losses to businesses in trillions of dollars which were responsible due to the fall in stock market prices. Interventions adopted by the apex institutions like central banks and resident governments to withhold such shocks were undertaken to lessen and control them through instrumental object like monetary policy which play a very significant role . The present paper focuses on the economic trends of three countries depending upon the categorization of their developments, i.e., advanced economy, emerging economy and low income economy. The study includes United States, China and Tanzania (Sub-Saharan Africa). The analyses of various macro-economic indicators (variables for the study) of these countries are considered to estimate the factors which influence the growth (GDP) of these economies. The correlation analysis and t- test statistics forms a major part of the study .The hypothesis statements for the variables are considered to study the interrelationship between the GDP as a constant variable in comparison to the other variables. The main findings of the study reveal that the advanced economies are highly influenced by the foreign exchange reserves and current account balance as their main factor for the growth i.e., Gross Domestic Product (GDP). Emerging economy like China has been influenced by FDI, which plays a vital role thereby increasing the country’s overall reserves as the main factor for growth. Tanzania as the low-income country in past few years observed potential growth in external debt, FDI and reserves, showing a negative current account balance, since the country has very less impact of global financial crisis 2008 over its growth. The impact of monetary policies of Federal reserve on financial crisis were stimulative which lowered the federal fund rates (zero lower bound), which was stable for a longer time. The People’s Bank of China implemented on how to stimulate household consumption effectively and mitigate the pressure of unemployment along with the strategies to diversify China’s foreign exchange portfolio. To rescue the world economies from this global down turn, the IMF called for arrangements to provide emergency liquidity, improve financial sector supervision and take a comprehensive approach to financial sector stability assessment that includes all types of institutions. For lowincome country, Tanzanian economy to rescue, the IMF called for arrangements to provide emergency liquidity, improve financial sector supervision and take a comprehensive approach to financial sector stability assessment that includes all types of institutions