Impact of global financial crisis on economic growth of south asian countries

Abstract

The economy of the country is generally dependant on the controlled level of the inflation, extent of employment generation and consistent growth in the goods and services sector. All the financial and economic indicators converge at the same point of the economic growth of the country. The developed countries are maintaining sound economic and financial systems as compared with the developing countries; hence they have the capacity to absorb any economic or financial shocks. The global financial crisis of 2008 which emerged in the US has put both the developed and developing countries in great trouble. The global financial crisis has affected almost all the indicators of financial and economic system in both the developed and developing countries. Current research work is an effort to identify and explore the affects of the global financial crisis that emerged in 2008 on the macroeconomic indicators of South Asian countries. Data is taken for the period of 2002 up to 2010 for all the countries. For conducting the research few macroeconomic variables have been selected which show the effect of global financial crisis on the economic and financial stability of the country. The selected variables are foreign direct investment, exchange rate, economic growth as % of GDP, stock market performance, external and fiscal deficits’. Simple regression ordinary scale method test is applied to develop the sound relationship between the variables selected. It is suggested from the study that the global financial crisis of 2008 has put the negative impact on the financial and economic indicators of South Asian countries. Developing countries more specifically the South Asian countries need more time to regain their financial and economic strengths.