Liang, Y. (2012). Global Imbalances as Root Cause of Global Financial Crisis? A Critical Analysis. Journal Of Economic Issues, 46(1), 101-117.
Liang, (2012) asserts that the main cause of the 2008 global financial crisis has its roots at factors such as the global imbalance or global saving glut. According to their analogy, these conditions arise from rather unconventional entrance of Asian countries such as china into the global market and their running of surpluses with US taking the fall back. This article focuses on the importance of formulating a balance that will in turn ensure financial stability and an easier economic recovery. This predicament has led to U.S lobbying for the re-evaluation of Chinas Yuan currency as a remedy to ensure balance in the global economy. The U.S contents that through the review of Chinas currency, a great deal of balance would be attained as trade, and capital flow between the two countries should eventually normalize. The article also recognizes the rather controversial aspect that the remedy to financial crisis has as its bargaining card. Even though the remedy seems workable from a theoretical perspective, the aspect that global financial crisis can be solved by realignment of currency remains a farfetched agenda. The lack of tangible proof to objectify reason as to why inflow of foreign saving diminishes U.S interest rates and leads to the inflation of asset prices remains a primal reason for the lack of a compelling reason for the adoption of the solution. The so called solution to global financial crisis also refuses to acknowledge the purpose of global financial organization in providing development strategy and the presence of economic imbalances in Asian countries. Since the solution, to global financial crisis basis its integrity to the revaluation of currency, an important point to consider remains the fact that forcing Asian countries to undertake the task may result in reducing global demand and direct it to surplus countries instead of the actual reverse intended. The journal focuses on the application of global rebalancing and a short term remedy to the U.S on demand enhancing solutions.
Al Qudah, G. (2012). Fair Value Accounting and the Global Financial Crisis. European Journal Of Economics, Finance & Administrative Sciences, (49), 80-89.
Al Qudah, in his journal assert that countries have witnessed an extraordinary global financial crisis focusing on the effects that result from the crisis as well as the consequences especially on the banks plus the investment corporate forcing them to become insolvent. There have been a series of debates concerning the financial crisis especially on the part handled by the fair value. A great number of arguments confirm that the current global financial crisis results from the fair value secretarial approach. This has evidence from the incredible vacillation present in the financial market thus, the witnessing of an incredible number of banks that have been collapsing. An alternative argument is that which tries to create no link between the fair value accounting with the current financial crisis together with the bank failure. Looking at the various research studies carried out it is evident to take note that fair value accounting the major reason as to why the financial crisis was at its peak. Reasons are being tabled to put the blame on fair value yet there is no substantial evidence that proves its contribution to the financial crisis influence. There is need for more critical supervision on the application of fair value loom in addition to resolving to trained persons to determine fair values on rather reliable revaluations. To respond to the financial crisis, numerous specialized organizations responded to relieve the unenthusiastic effects suggested to the accounting and auditing vocations. An attempt to come up with plenty of amendments and rearticulates in the professional pamphlet the way it represented the suggested intercontinental standards, the Clarity Project, which seeks better lucidity thus, getting rid of the confusion concerning international standards.
Williams, C., & Martinez, C. (2012). Government Effectiveness, the Global Financial Crisis, and Multinational Enterprise Internationalization. Journal of International Marketing, 20(3), 65-78.
William and Martinez focus on how national institutions influence the entry mode behavior of multinational enterprises during a financial crisis. Basing his argument from the institutional and cost theories, William and Martinez make two suggestions these are: an alternative hypothesis for host country effectiveness, which is a spatial institution, and another hypothesis for global financial crisis to have a direct or indirect effect. This study by William and Martinez shows that financial crisis presents a market entry points opportunities for firms to respond quickly if their objective is to exploit internationalization opportunities before any competitor does. A host country’s opportunity to draft and effectively implement these laws loses its relevant objectives. With the urgency and agility in this situation, a managers needs to react to foreign expansion decisions. In the study which contains a sample of 624 foreign expansion investments done by a Dutch multinational enterprise in the period between 2004 to 2009 in over 66 countries. William and Martinez’s study in the journal article attests that highest control by the host country more likely occurs when effectiveness of its government is high or when during the crisis, a firm makes an investment. From the study, firms during financial crises do not abandon internationalization. A case study of MNEs during the extended global financial crisis, are less aggressive, but highly selective when it comes to investing abroad. The MNEs continually reassess the risks with the abroad product-market opportunities. This study reveals that a huge number of investments during this financial crisis time in 2009 take place in developed countries revealing economic crisis creates an uncertain competitive space in investments.
Liang, Y. (2012). Global Imbalances and Financial Crisis: Financial Globalization as a Common Cause. Journal of Economic Issues, 46(2), 353-362.
In his journal, Liang explains how global imbalance connects to financial instability. This global imbalance explains some of the financial crises in the world such as the 2008 financial crisis. The two issues share a common cause, which is traceable. According to Liang, financial globalization in the financial system and the current global monetary system are the two factors he identifies as the cause of the global imbalance. Liang argues that financial globalization is the contributing factor to the issue of global imbalance through its role in impeding the adjustments of real exchange. Financial globalization according to the article not only contributes to the imbalance, but also makes worse the fragility of the global financial crisis and instability. Liang explains further in his article how financial globalization does this by outlining how it induces an export led growth, in addition to maintaining a wide gap deficit in the financial of a country. As the article reveals financial fragility due to financial globalization happens because of a genuine international clearing centre absence. Financial globalization affects the real world economy through trade and income flow. The author argues that this global imbalance evident by the current enormous and persistent account deficit including surpluses is largely due to financial globalization, which is a large, unregulated, and powerful financial flow. The issue affects contribution with states such as the United States failure to provide the necessary international banking services, which the system requires. According to Liang, this failure by the United States to provide these necessary services brought the 2008 global financial crisis. Liang’s article shows how the United State’s international monetary system will address the global imbalance issue.
Alfaro, L., & Chen, M. (2012). Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance. American Economic Journal: Economic Policy, 4(3), 30-55.
Alfaro et al seek to examine the differential response establishments to global financial crisis particularly focusing on the role of foreign ownership. They use a datasheet, which takes reports of operations, industry information, and location to conduct an investigation to determine how foreign ownership affects establishments’ resilience to adverse The severity of the global financial crisis leads many economists to try to understand its characteristics and causes across countries. The authors investigate the how the various multinational subsidiaries across the globe respond to financial crisis relative to the domestic establishments. From the study, it is evident that these multinational subsidiaries fare much better than the local competitors do under similar economic conditions. This study explores how these multinational corporations respond to the global financial crisis with reference to the underlying mechanisms that contribute to differential impacts of this crisis. Another finding from the study shows that, from these multinational subsidiaries, the establishments in sharing effective vertical production, including financial linkages, provides a much greater resilience against global financial crisis. Whereas horizontal subsidiaries share relationship with parent firms, the study show that vertical subsidiaries production complements that of parent firms. These linkages come in play to lead to a different impact during a financial crisis when a host country experiences demand decline. This ability of multinational corporations to shift its production back home enhances a volatile performance. In contrast to the financial crisis, the study shows it is evident that foreign ownership, and linkages performance is robust to empirical specifications, which deal with effects of local linkages, and firm heterogeneity. Findings by Alfaro et al provide significant policy implication on FDI role during global financial crisis.
References
Alfaro, L., & Chen, M. (2012). Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance. American Economic Journal: Economic Policy, 4(3), 30-55.
Liang, Y. (2012). Global Imbalances and Financial Crisis: Financial Globalization as a Common
Cause. Journal of Economic Issues, 46(2), 353-362.
Williams, C., & Martinez, C. (2012). Government Effectiveness, the Global Financial Crisis, and Multinational Enterprise Internationalization. Journal of International Marketing, 20(3), 65-78. doi:10.1509/jim.12.0078
Liang, Y. (2012). Global Imbalances as Root Cause of Global Financial Crisis? A Critical Analysis. Journal Of Economic Issues, 46(1), 101-117.
Al Qudah, G. (2012). Fair Value Accounting and the Global Financial Crisis. European Journal Of Economics, Finance & Administrative Sciences, (49), 80-89.
