The Impact of the Global Financial Crisis on the Industrial Development of Least Developed Countries - Essay Example

 The global financial crisis affected both developed and developing financial institutions. A financial crisis refers to a situation in which some financial assets lose a large part of their nominal value. The main objectives are, first, determine the cause of the global financial crisis and secondly, the effect of the financial crisis on the developing country. It will enable governments to come up with strategies for predicting and preventing future occurrences. The private sector will be able to cushion their businesses from a financial crisis and learn how business practices can cause a financial crisis. Literature Review. Many economists consider the 2008 to 2012 financial crisis as the worst since the great depression of the 1930s. It led to the collapse of financial institutions and, the decline in consumer wealth (Muma, 2012, p. 6); the stock market dropped worldwide, and mortgages defaulted in the housing sector.

What started as the US mortgage crunch (Sun et al., 2011, p. 2), extended to other nations, especially the European Union. On September 14, 2008, the fate of Lehman Brothers was to be decided (Dolezalek, 2011, p. 7). The eventual fall of Lehman Brothers undermined the confidence and trust of the investors in the financial market. One year earlier, the Bank of England had bailed out Northern Rock, a large mortgage lender (Dolezalek, 2011, p. 7). The financial and banking crisis that started in the developed nation reached the least developed nation through at least three channels.

First, the crisis led to a sharp decline in world trade volume (Alabi et al., 2011, p. 3) and commodity prices (Alabi et al., 2011, p. 116). Secondly, foreign direct investment started declining in 2007 and hurt most, of the mineral and oil-exporting nations (Nafziger, 2012, p. 546). Thirdly, it led to a reduction in foreign remittances to the least developed countries. The research will extend the body of knowledge by critically analyzing how the crisis flowed from the developed nations to the least developed nations and the impact it had on this nation’s industrial The research will be quantitative and will analyze the secondary data. The data will be used to answer the research questions and determine if there is any evidence of the effects of the global financial crisis on the least developed nations. Data will be collected from public institutions, private institutions, internainstitutionsitutions and then cleaned before any statistical analysis is done. The study aims to identify the link between the financial crisis and the least developed countries.