Since many of the leading economies in the world are in North America and Europe, these regions are the worst hit. East Asian economic giant Japan seems not to have been impacted. Emerging economic superpowers in the form of China and India have shown stable credit markets too. (Barrell & Hurst, 2008) As the U.S. financial markets are most closely linked to that of Europe in general and the UK in particular, the effect of the credit crisis is most acute on the latter. If the total losses induced by the current economic recession crosses $1000, then this will constitute a 7.4 percent contraction in US GDP. But other countries such as the UK will also be affected by this contraction since their banking institutions have invested in US mortgages. This means that other countries such as the UK are adversely affected as well. In the UK, although the losses have not measured accurately so far, it is a fair estimate that losses of 2-3 per cent of GDP have been incurred.
But even before the credit derivatives crisis took hold, the IMF gave out warnings through its World Economic Outlook reports. The report also made obvious that any crisis in the U.S. ...Show more