Economic Recession in Bangladesh

825 Words4 Pages
* Economic recession of America and it’s spillover effect over the world Reason of economic recession: The following are the reason for economic recession in U.S.A. * Liberalization: The policy of U.S.A govt. was to provide housing facility for each and every citizen. So Federal Reserve directs the other institutions to disburse the loan. And the financial institution had to provide housing at a subsidized rate. This creates the non performing loan. * Sub-prime mortgage: Sub- prime mortgage is a type of mortgage that is normally made out to borrowers with lower credit ratings. It is a poor kind of mortgage which U.S.A govt. permits in its country. So the commercial banks face liquidity crises. * Fail to develop industrial sector: As each and everyone had house so there was no tenant or no buyer, so the price of housing decreases and the commercial bank faces NPL and liquidity crises. This affects the industrial sector as they need cash on daily basis. No new industry had been funded .Moreover the existing industries had closed. * Employee Layoff: As the industrial development had been fallen down, so most of the industrial sector layoff their employees and creates economic recession in U.S.A. * Spillover effect Of U.S.A recession To meet the liquidity crises U.S.A govt. applies for loans from European and Middle East countries. These countries find it profitable to invest in the U.S.A economy and accept the loan application. But the commercial bank of these countries also falls in liquidity crises. And thus the global financial market also falls. * Effect over Asia Bangladesh * Investments: Because the global financial market has fallen down because of investing in the U.S.A economy, so interest rates rises and lenders seek for relatively less risky borrowers. As a result Bangladeshi business find it harder to borrow. This in turn
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