Why the global financial crisis did not affect strongly on
the underdeveloped countries?
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Answer Posted / khushal
it would be wrong to say that global meltdown didn`t
influence underdeveloped countries but yes they are also
badly influenced from global slowdown because :-
a)most of underdeveloped countries had large trade surpluses.
b)in us slowdown happened because of sub-prime mortgage
market such as hedge funds,cdo`s,credit default swap but
underdeveloped nations are quite far from mortgage market.
c)us financial system collapsed because there were many too
big to fail banking or non-banking firms such as
lehman,freddie mac,fannie mae.aig,they all lead to reduction
in confidence in financial market and us had many policy
blunders for example-excessive freedom to market as it was
quoted by sir stiglitz(nobel prize winner) but
underdeveloped nations kept the financial system in control
and healthy.
d)most of underdeveloped nations have growth driven by
domestic demand so there is not much influence on
underdeveloped nations.
e)underdeveloped nations made several economic reforms over
past decade which made them more stable and efficient.
f)underdeveloped nations had less trade linkages with us.
g)underdeveloped nations were the net savers not borrowers.
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