The last financial crisis 2007-2009 has many implication on different Term Paper

The last financial crisis 2007-2009 has many implication on different markets , however there are some arguments that the gulf a - Term Paper Example Granting of loans in an uncontrolled manner, which resulted in the value of the loan exceeding that of the assets, was the root of the problem. These loans were provided to the borrowers without conducting a minimum check on their credit-worthiness. The result was that many of the borrowers failed to pay their loans back, which clearly reflected the financial status of the institutions and their inability to pay their obligations, thereby resulting into collapse. This paper investigates the severity of the impact on the GCC market. In this context, the financial market of the GCC countries has been considered along with special attention towards Qatar. The study revealed that the severity of the impact was not as huge as compared to the rest of the world. This can be due to the fact that the policy makers of GCC countries took ardent steps to mitigate the risk. Moreover, the Qatari economy did not get much affected and the banks were declared solvent in that time. However, the real e state business was seen to experience huge hit by the credit crunch. 1. Introduction In the year 2008 and 2009, the global economy was rocked by the financial crisis which was considered as the most devastating economic event, after the Great Depression in 1930s. The aftermath of this global crisis was felt in every part of the world. The global crisis was initiated by the low interest rate regime along with huge inflow of foreign funds that led to the housing construction boom and encouraged large consumption of debt-financing in USA. The Federal Government of United States made it possible for almost everyone to own a home by giving 1 percent rate on the mortgages. The loans that included the mortgages were given to almost everybody without checking the credit worthiness of the borrowers (Sivakumar and Krishnaswami, 2012). With the decline in the housing prices, the major financial institutions, which were involved in borrowing for investing in the subprime MBS, had reported signi ficant loss. This decrease in the price also resulted in a fall in the prices of the homes that worth less than the mortgage loans, which incentivised financially the entry towards the foreclosure. Towards the end of 2008, the crisis peaked. Several banks and other financial institutions of Europe and USA failed as a result of this crisis and governments were trying hard to save these institutions by bailing them out (Kasekende, Ndikumana and Rajhi, 2009; Anon., 2009). The crisis started propagating beyond its epicentre, thereby affecting not only the advanced economy, but also the emerging economies and the rich Arab GCC countries. This paper aims to analyse the degree of impact on the GCC countries. In this context, the paper will specially analyse the situation in Qatar and other GCC countries. 2. Literature Review 2.1 Evolvement and Concept of Global Financial Crisis The term financial crisis refers to the sudden reduction in the price of the assets, which can be financial, such as, bonds and shares and can even be materials like, equipments and machinery. This sudden reduction can result from the price bubble which indicates an abrupt and huge increase in the prices ending in a sudden collapse. Moreover, the bankruptcy of Lehman Brothers, the giant financial institu