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Problems Stemming from the Economic Crisis and Potential Recovery - Research Paper Example

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Author : queenierolfson

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11th November 2011 Problems stemming from the economic crisis and potential recovery The recent economic recession greatly affected the operations of both local and international companies. As a result, companies have emulated various strategies in their effort to reduce the cost of operation in order to increase their profits and reduce the cash outflow…

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Problems Stemming from the Economic Crisis and Potential Recovery

The policies adopted by the governments are aimed at enhancing sustainable economic growth by ensuring that the structural and macroeconomic causes of the recession are addressed. Through adoption of effective policies that ensures the stability of the supply side of the economy, macroeconomic benefits would ultimately emerge. First, they ensure fiscal sustainability since they add credibility to the borrowing demands by the government. Secondly, they enhance redeployment of resources due to the fact that they use the opportunities that emerged after the structural changes that emerged after the recession. One of the implications of the recession was the reduced level of research and development (R&D). This was due to the contraction of the retained earnings which is the major source of financing R&D. In addition, many financial institutions have become more risk averse thus making it hard for companies to get external funds to support their research and development initiatives (OECD 12). ...
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