Global Financial Crunch
&
Its Impacts on Pakistan\u2019s Textile Industry
(Performance & Exports)

Subject: Corporate Finance
Section: \u201cB\u201d
Faculty: Mr. Shahansha Alam Siddiqui

planes into the world trade centre on September 11th US congress members met to plan a message to the stunned public. \u201cWe\u2019ve got to give people confidence to go back outside and go to work, buy things, go back to the stores, get ready for thanksgiving, get ready for Christmas,\u201d said one member of congress, echoing the message of the

fact that after one of the most shocking events in US history government officials were urging citizens above all to shop and work is ample testimony the significance of consumption in the effective working of our economy and indeed for the whole society.\u201d

Thereafter, the US subprime mortgage crisis erupted in summer 2007 few people expected that it could hit the entire world economy so hard. One year later nobody had already doubts that we faced a financial system crisis on the global scale with dramatic macroeconomic and social consequences for many regions and countries. Few local analysts and politicians would dare claiming that their country is shielded from the financial crisis effects as the storm unfolds worldwide. Left to the unknown is its scale, sequencing, distribution effects between regions and countries and the consequences for the future architecture of the financial system. As critical as the quality of the day-to-day management of the crisis is the understanding of what has happened and what may happen, whence the need for an interim diagnosis, even one incomplete and involving a certain margin of misperceptions and wrong interpretations.

This short commentary tries to analyze the extent to which monetary policy and financial market regulation failures bear responsibility for the eruption of this crisis and its further spread, the zigzags of anti-crisis management, crisis impact on emerging markets and, finally, to present some tentative lessons for policymakers.