Assignment on

Topic: Global Financial Crisis: 2007-2008

Submitted To:
Jakowan
Assistant Professor,
School of Business & Economics.

Submitted by:
Shamsil Arefin
1112310155

Name of course: Introduction to Business

Course Code: BUS 1102
Section: D

Date of Submission: 26 February, 2023

 Introduction

A worldwide economic slowdown known as the global financial crisis (GFC)

started in 2007 and continued until 2009. The collapse of the US housing
market, the widespread use of sophisticated financial products like
mortgage-backed securities, and the loss of significant financial institutions
were a few of the reasons that contributed to the crisis.

When the crisis grew worse, it affected nations outside of the United States
as well, severely reducing international trade and investment. Several
banks and financial organizations failed as a result of the crisis, which also
caused widespread job losses and a steep drop in stock prices.

Governments and central banks around the world implemented a variety of

measures in response to the crisis, including extensive economic stimulus
packages, monetary policy interventions.

There were multiple primary causes of the global financial crisis

(GFC), among them:
Housing market collapse: The US housing market was overvalued, and
borrowers with bad credit histories were provided subprime mortgages,
which caused home prices to plummet and a large number of foreclosures.
Financial deregulation: Regulatory organizations failed to enforce
regulations that could have stopped the crisis, allowing financial institutions
to take on excessive risk.
The growing use of sophisticated financial instruments, such as mortgage-
backed securities, made it challenging to evaluate the risks associated with
investments.
Credit expansion: The ease of obtaining credit contributed to rising
borrowing and debt accumulation, notably in the housing industry.
The world economy was significantly impacted by the global financial crisis,
which caused a severe decline in international commerce and investment.
There was a global recession, marked by rising unemployment and
declining GDP. The financial industry was also severely impacted by the
crisis, with numerous banks and financial organizations failing or
necessitating government bailouts.
Governments and central banks around the world responded to the crisis
by enacting a variety of measures, such as extensive economic stimulus
packages, monetary policy interventions, and regulatory reforms intended
to stop a future crisis of a similar nature. The GFC serves as a cautionary
tale about the risks of unregulated financial speculation and the
significance of strong regulation and oversight of the financial sector, even
if the global economy has subsequently recovered.

Bangladesh's economy was significantly impacted by the global

financial crisis of 2007–2008, despite the fact that it wasn't as badly
hit as some other nations. Some of the crisis' most significant effects
on Bangladesh include:
Remittances: With millions of Bangladeshis working abroad and bringing
money home, remittances are a key source of foreign exchange for
Bangladesh. Remittances, however, drastically decreased during the global
financial crisis, having a considerable negative economic effect.

Bangladesh's economy is highly reliant on exports, particularly in the textile

and apparel industries. Since global trade shrank during the crisis, there
was a reduction in demand for certain goods, which decreased exports and
earnings.

Foreign investment: Bangladesh relies heavily on foreign direct investment

(FDI), particularly in the infrastructure and energy sectors. Yet, as
international investors were increasingly risk apprehensive during the crisis,
FDI flows decreased.
Exchange rates: As a result of the global financial crisis, investors moved
their funds to safe-haven currencies like the US dollar. As a result, the
pressure on the Bangladeshi taka increased, and the nation's central bank
was forced to act to stabilize the exchange rate.

Banking sector: The subprime mortgage market and other intricate financial
instruments that contributed to the crisis were not directly exposed to
Bangladesh's banking industry. Yet, because of its vulnerability to foreign
trade and remittances, the industry experienced indirect effects.

Generally, Bangladesh was less affected by the global financial crisis than
some other nations, in part because Bangladesh had less exposure to the
sophisticated financial instruments that were the crisis's main source.

Conclusion
One of the greatest economic crises in history, the global financial crisis of
2007–2008 seriously harmed the global economy. The housing market
crisis in the US swiftly spread to the rest of the world's financial system,
causing a credit crunch and a serious economic collapse. High
unemployment rates, slowing GDP growth, and large financial losses
affected many nations.
In Bangladesh, the effects of the crisis were somewhat less severe than in
other nations, in part because of the country's relatively closed financial
sector. A considerable slowdown in economic growth and a fall in exports
were yet suffered by the nation, particularly in the garment industry, one of
its important sectors.
Ultimately, the 2007–2008 global financial crisis brought to light the
interdependence of the world financial system as well as the dangers of
using complicated financial products and taking on too much risk. It also
showed that stricter rules and control were required to stop future disasters
of this nature.