Major Assignment For MS and MBA

Name: Ayesha Shah

MBA Finance

Semester: 1st

Subject: ARM

Submitted To: Dr. Sayed Mohsin Ali Shah

Topic: Writing A Research Proposal

ABDUL WALI KHAN UNIVERSITY MARDAN

Research Proposal

Title: The Impact of Financial Crises on the Real Economy

1. Introduction

The research proposal makes a specialty of studying the impact of monetary crises on the real
economic system. Financial crises are occasions that occur whilst there are most important
disruptions in economic markets, regularly leading to problems within the banking zone and next
economic downturns. These crises have vast effects for the wider financial system, affecting
organizations, individuals, and governments.

The proposal emphasizes the importance of knowledge how economic crises have an effect on
the actual economy. This know-how is vital for policymakers, economists, and organizations to
broaden powerful strategies and measures to mitigate the poor outcomes of such crises. Via
inspecting the interconnectedness between monetary markets and the wider financial device, the
research goals to provide treasured insights into the dynamics and results of economic crises.

The proposed studies will probably contain studying ancient facts from beyond monetary crises
and their impact on various economic signs inclusive of GDP boom, unemployment charges,
funding degrees, and client spending. Moreover, it is able to explore the transmission
mechanisms via which economic crises affect the real economy, which include disruptions in
credit availability, investor confidence, and market liquidity.

By using conducting this research, policymakers can gain a higher understanding of the capacity
dangers related to monetary crises and increase more effective guidelines to prevent or mitigate
their impact. In addition, economists can beautify their theoretical fashions and empirical
frameworks to better seize the complexities of financial crises and their effects. In the end,
corporations can adapt their strategies and threat management practices to be higher prepared for
capacity crises and limit their detrimental outcomes.

2. Background and Context of the Research Problem

Financial crises were habitual occasions throughout history, with incredible examples consisting
of the 2008 global monetary disaster and the monetary downturn resulting from the COVID-19
pandemic. Those crises have had a long way-achieving results, highlighting the vulnerabilities of
the worldwide monetary system and their unfavorable impact on the actual economy.

During financial crises, disruptions occur in financial markets, which might be vital for
facilitating the drift of finances and allocating capital effectively. Those disruptions can take
numerous paperwork, such as sharp declines in stock costs, multiplied volatility in forex markets,
and a lower inside the availability of credit. As a end result, monetary establishments, along with
banks, frequently face significant distress, main to a contraction in lending sports and a reduction
in their ability to support financial growth.

The effects of economic crises increase beyond the financial quarter and show up inside the
broader economy. One of the key transmission mechanisms is through the banking sector. When
banks face economic distress, they end up extra careful in extending credit, which adversely
influences organizations and people. Decreased access to credit score hampers funding, making
it tough for organizations to increase operations, expand new products, or rent additional
employees. This, in turn, ends in lower financial output and expanded unemployment fees.

Financial crises also have a profound impact on purchaser conduct. During periods of economic
uncertainty, people tend to lessen their spending and boom their savings as a precautionary
measure. This lower in client spending in addition dampens monetary interest and might
exacerbate the economic downturn.

Moreover, financial crises can disrupt investor self-assurance. While traders experience sizeable
losses in financial markets, they'll grow to be greater danger-averse and reluctant to put money
into productive belongings. This can hinder the financing of new initiatives and obstruct
monetary increase.

The interconnectedness among economic markets and the real economy is complicated and
multifaceted. Expertise the particular channels thru which financial crises effect the real financial
system is vital for policymakers, economists, and companies. Policymakers need insights into the
dynamics of monetary crises to layout appropriate measures that may stabilize monetary markets
and assist economic healing. Economists strive to decorate their theoretical models and empirical
frameworks to better seize the complexities of financial crises and their consequences.
Organizations need to conform their techniques and danger management practices to navigate the
demanding situations posed via economic crises and mitigate their detrimental results.
Given the importance of economic crises and their impact on the real financial system, it's miles
vital to conduct in-intensity research to advantage a complete information of the dynamics and
consequences of these crises. Such research can inform policy choices, contribute to financial
theory, and help groups broaden powerful strategies to face up to and recover from financial
crises

3. Research Questions and/or Hypotheses

Research Questions:

1. How do financial crises affect key macroeconomic variables such as GDP growth,
employment rates, and investment levels in the real economy?

2. What are the transmission mechanisms through which financial crises impact the real
economy?

3. Are there any distinguishing characteristics or factors that make certain economies greater
resilient or liable to the results of financial crises?

Hypotheses:

1. Financial crises have a negative effect on GDP growth, employment rates, and funding tiers
within the real economy.

2. Financial crises transmit their effects to the real economy through channels such as disruptions
in credit availability, wealth effects, and increased uncertainty.

3. Financial elements, alongside the extent of economic market improvement, economic policy
measures, and regulatory frameworks, have an effect at the resilience of economies to the results
of monetary crises.

4. Significance and relevance of the study

This study is significant for numerous reasons. Firstly, it contributes to the present literature on
the impact of financial crises on the real economy by using supplying a complete analysis of the
transmission mechanisms and key macroeconomic variables affected. Secondly, the findings of
this examine might be relevant for policymakers and institutions worried in economic balance
and monetary law, assisting them in formulating powerful guidelines and rules to mitigate the
negative outcomes of monetary crises. Lastly, the examine presents insights for businesses and
traders to better apprehend the repercussions of financial crises on their operations and funding
choices.

5. Literature Review

This study is significant for several motives. First of all, it contributes to the present literature at
the effect of economic crises at the real economic system by supplying a complete evaluation of
the transmission mechanisms and key macroeconomic variables affected. Secondly, the findings
of this study could be relevant for policymakers and institutions worried in monetary balance and
financial regulation, helping them in formulating effective guidelines and policies to mitigate the
negative consequences of financial crises. Finally, they have a look at provides insights for
companies and traders to higher understand the repercussions of economic crises on their
operations and investment selections.

6. Research Design and Methodology

The literature evaluate performs a crucial position inside the research suggestion by means of
synthesizing current research on the impact of monetary crises at the real economic system. It
ambitions to offer a complete understanding of the subject by means of analyzing theoretical
frameworks and empirical evidence.

In reviewing the literature, the research will explore research that delve into the transmission
channels thru which monetary crises have an effect on the real financial system. This analysis
will involve identifying and examining the diverse mechanisms via which disruptions in
monetary markets and banking distress propagate to the broader economic system. These
transmission channels can also consist of credit score contractions, adjustments in investor self-
assurance, and disruptions in asset expenses, and the interplay among financial and real sectors.
Moreover, the literature review will survey research that check out the macroeconomic variables
which can be suffering from monetary crises. This analysis will embody inspecting the impact of
monetary crises on key financial signs, consisting of GDP increase, unemployment fees, funding
ranges, client spending, and inflation. By means of synthesizing the findings of these research,
the studies idea ambitions to offer insights into the precise channels thru which economic crises
impact these variables.

Furthermore, the literature review will bear in mind the variations inside the consequences of
monetary crises across international locations and time durations. This evaluation will involve
exploring studies that have a look at the heterogeneity inside the impact of crises, contemplating
elements such as the extent of economic improvement, regulatory frameworks, policy responses,
and the institutional context of different economies. Information the versions in the effects of
financial crises can contribute to a greater nuanced understanding of the topic.

In identifying gaps inside the current information, the literature evaluate will highlight regions in
which similarly research is needed. These gaps may additionally arise from limited analysis of
precise transmission mechanisms, insufficient empirical proof in sure contexts, or the want for
updated research thinking about recent financial crises.

The conceptual framework and theoretical underpinnings of the research proposal may be
advanced primarily based on current theories and fashions inside the field of finance and
economics. The economic accelerator idea, which explores the amplification of shocks via the
economic gadget, the stability sheet effects that stand up from adjustments in asset values, and
the credit channel, which emphasizes the importance of credit score availability for economic
hobby, are examples of theoretical frameworks with a purpose to be considered. These theories
provide a basis for knowledge the mechanisms thru which economic crises effect the actual
economy.

With the aid of engaging in a radical literature evaluate and identifying gaps in cutting-edge
knowledge, the research suggestion goals to contribute to the present literature and provide a
solid foundation for the following empirical evaluation and findings of the take a look at.

7. Population and Sampling

7.1. Description of the Target Population

The target populace for this look at includes nations which have skilled massive monetary crises
during the last few a long time. The choice might be based totally at the severity and impact of
the crises, making sure a numerous range of economic, political, and regulatory contexts.

7.2. Sampling Technique and Sample Size

A purposive sampling technique will be employed to select a sample of countries that adequately
represent the target population. The sample size will be determined based on statistical power
analysis, ensuring sufficient statistical significance to draw valid conclusions.

7.3. Inclusion and Exclusion Criteria

Inclusion criteria will involve countries that have experienced major financial crises, have
available and reliable macroeconomic data, and represent diverse regions and income levels.
Exclusion criteria may include countries with limited data availability or those experiencing
ongoing conflicts or political instability.

7.4. Justification of the Chosen Sampling Method

The purposive sampling method allows for the selection of countries with relevant characteristics
and experiences related to financial crises, ensuring the research findings are applicable to a
broader context. This method ensures a representative sample that captures a diverse range of
economic environments.

8. Data Collection

8.1. Description of the Data Collection Instrument(s)

The data collection will generally depend on secondary data from official resources such as
worldwide groups, central banks, and academic databases. Key variables of hobby encompass
GDP growth rates, employment statistics, investment tiers, economic market indicators, and
different applicable macroeconomic variables.

8.2. Instrument Development and/or Validation Process

Since the data collection involves the utilization of existing datasets, instrument development or
validation is not applicable to this study.

8.3. Data Collection Procedure(s)

The data collection procedure will involve gathering relevant macroeconomic data from various
sources, ensuring data accuracy and consistency. A systematic approach will be followed to
ensure comprehensive coverage of variables across the selected countries and time periods.

8.4. Pilot Testing (if applicable)

Pilot testing is not applicable in this study as it involves the collection of secondary data from
existing sources.

9. Data Analysis

9.1. Description of the Data Analysis Technique(s)

The data analysis for this examine will involve the application of statistical techniques to have a
look at the relationships among economic crises and macroeconomic variables. Two normally
used techniques on this context are panel statistics evaluation and time-series analysis.

Panel records evaluation is a technique that combines move-sectional and time-collection

records. It allows for the examination of individual entities (international locations, in this case)
over a couple of time periods. This method is mainly beneficial for investigating the
consequences of economic crises throughout unique countries and taking pictures USA particular
heterogeneity. Panel statistics analysis can provide extra robust estimates and manipulate for
unobserved USA specific elements.

Time-collection evaluation, on the other hand, specializes in reading the behavior of a variable
over the years. It helps discover tendencies, patterns, and relationships inside an unmarried
United States of America’s information. Time-collection evaluation can offer insights into the
dynamic nature of macroeconomic variables and their reaction to monetary crises.

Within those broader techniques, particular econometric methods may be employed, which
includes regression evaluation and causality tests. Regression evaluation lets in for the estimation
of the relationship between a structured variable (including GDP growth) and one or greater
unbiased variables (along with signs of financial crises). It facilitates quantify the value and
significance of the relationship and manipulate for different applicable factors. Causality exams,
including Granger causality assessments, take a look at the causal courting between variables,
determining if modifications in one variable precede and are expecting modifications in any
other variable.

9.2. Assumptions and Conditions for the Selected Techniques

The selected techniques rely on certain assumptions and conditions to ensure the validity and
reliability of the results. These include:

1. Availability of Reliable Data: The analysis assumes the availability of accurate and
reliable data for the chosen macroeconomic variables and financial crisis indicators. Data quality
is crucial for obtaining meaningful and trustworthy results.

2. Statistical Assumptions: The selected techniques assume that the data follow certain
statistical assumptions. These assumptions include normality (the data are normally distributed),
homoscedasticity (constant variance of errors), and independence of observations. Violations of
these assumptions may require the application of appropriate corrective measures or alternative
techniques.

3. Absence of Multicollinearity: Multicollinearity refers to an excessive correlation between

impartial variables in a regression model. It can distort the estimated coefficients and affect the
translation of the outcomes. The absence of multicollinearity is important to ensure the reliability
of the envisioned relationships.

4. Addressing Endogeneity: Endogeneity takes place while there is a bidirectional courting

among variables, leading to capability bias in the estimation. To address endogeneity,
appropriate econometric techniques, consisting of instrumental variable techniques or manipulate
function methods, may be employed.

To ensure the validity of the selected techniques and address any violations of assumptions or
conditions, diagnostic tests will be conducted. These tests may include checking for normality
and homoscedasticity of residuals, assessing correlation matrices for multicollinearity, and
conducting tests for endogeneity.
9.3. Data Processing and Management Plan

Data processing involves several steps to prepare the collected data for analysis. These steps may
include:

1. Data Cleaning: This involves checking for missing values, outliers, and inconsistencies in
the data. Missing values may be imputed or handled through appropriate methods. Outliers, if
detected, may require investigation or transformation.

2. Data Organization: The data will be organized in a structured format, such as a panel
dataset or a time-series dataset, depending on the selected analysis techniques. Variables will be
appropriately labeled and organized for ease of analysis.

3. Data Transformation: Multicollinearity refers to a high correlation among impartial

variables in a regression version. it could distort the anticipated coefficients and affect the
interpretation of the outcomes. The absence of multicollinearity is crucial to ensure the reliability
of the anticipated relationships.

4. Statistical Software: Endogeneity happens when there's a bidirectional dating between

variables, leading to capability bias in the estimation. To address endogeneity, appropriate
econometric strategies, inclusive of instrumental variable tactics or control feature methods, can
be employed.

In the course of the facts processing and analysis tiers, it is important to preserve right
documentation and transparency, making sure that the steps taken are reproducible and nicely-
documented for potential replication through different researchers.

10. Ethical Considerations

In terms of ethical considerations, several measures will be implemented to ensure the integrity
and privacy of the research.

Firstly, since the study relies on secondary data, the informed consent process is not applicable
as there are no direct participants involved. The data used will be obtained from publicly
available sources or existing datasets, ensuring that individual consent is not required.
To uphold privacy and confidentiality, stringent measures can be observed throughout the
research manner. All collected records can be anonymized and saved securely, with constrained
access granted most effective to the researchers worried. By means of casting off personally
identifiable statistics and adhering to statistics safety protocols, the confidentiality of individuals
and agencies will be safeguarded.

In phrases of risks and advantages, this have a look at does now not at once contain human
members. Therefore, there are no expected dangers or benefits for people or groups associated
with their participation within the studies.

As this studies does now not contain human subjects and only is based on existing information,
institutional evaluate board (IRB) approval is not relevant. But, ethical tips and concepts will still
be upheld to make certain the research is performed with integrity and admire for privateness.

By adhering to strict privacy and confidentiality measures, this research aims to maintain the
highest ethical standards. The use of secondary data and the absence of direct participant
involvement further contribute to mitigating any potential ethical concerns.

11. Expected Contributions, Limitations, and Future Research

11.1. Anticipated Contributions to the Field and Potential Implications for Policy or
Practice

The anticipated contributions of this have a look at are big for the sector of economics and
feature capacity implications for policy-making and practice. Via carrying out a complete
evaluation of the effect of monetary crises on the actual economic system, the have a look at
targets to provide a deeper information of the dynamics and transmission channels worried. This
information can have several critical implications:

1. Enhanced Policy Measures: The findings of the examine can tell policymakers
approximately the precise macroeconomic variables and transmission channels which can be
most suffering from economic crises. This knowledge can assist them design and implement
greater powerful coverage measures to mitigate the unfavorable outcomes of such crises. As an
example, if the look at unearths that credit availability and investment are severely affected at
some point of financial crises, policymakers can prioritize measures that concentrate on those
areas to sell monetary balance.
2. Improved Financial Regulation: financial regulators can utilize the insights received from
this examine to strengthen financial law and supervision. By way of figuring out the
vulnerabilities and risks that arise in the course of financial crises, regulators can expand greater
sturdy frameworks and implement preventive measures to lessen the probability and severity of
future crises. This can contribute to greater economic balance and reduce the negative impact at
the real economy.

3. Business Strategy and Risk Management: The study's findings can also have
implications for businesses and corporations. By understanding the specific channels through
which financial crises affect the real economy, companies can adjust their business strategies and
risk management practices accordingly. This can involve adopting more conservative financial
practices, diversifying their portfolios, and improving their resilience to withstand the adverse
effects of financial crises.

4. Economic Stability and Growth: Ultimately, the examiner’s contributions may have
broader implications for general monetary stability and growth. By means of gaining a complete
expertise of the effect of monetary crises on the actual economic system, policymakers and
corporations can work collectively to increase strategies that sell economic resilience and
mitigate the terrible outcomes of such crises. This may cause more strong monetary
environments, accelerated investor self-assurance, and sustainable long-term increase.

11.2. Limitations of the Study and Potential Areas for Future Research

Whilst the study goals to provide precious insights into the effect of monetary crises at the real
financial system, it's far important to renowned its limitations and perceive potential areas for
future research. A number of the constraints encompass:

1. Data Availability and Reliability: The study's findings might also rely on the provision
and reliability of ancient records. Information boundaries, in particular for positive nations or
time durations, may also restriction the scope and generalizability of the analysis. Future
research can consciousness on enhancing information series techniques and expanding the
pattern size to beautify the accuracy and robustness of the findings.

2. Endogeneity Issues: Endogeneity refers to the potential bidirectional relationship between

financial crises and the real economy. Financial crises can both be influenced by and influence
macroeconomic variables, leading to endogeneity issues in the analysis. Future research can
employ advanced econometric techniques, such as instrumental variable approaches or panel
data methods, to address endogeneity concerns and establish causal relationships more
accurately.

3. Sector-specific Analysis: The study might also offer an extensive overview of the effect of
monetary crises on the real financial system. However, future research can delve deeper into
precise sectors or industries to have a look at their unique vulnerabilities and responses to
economic crises. This area-specific analysis can provide centered insights and help policymakers
and agencies tailor their strategies and guidelines accordingly.

4. Long-term Implications: even as the study focuses on the immediately impact of financial
crises at the real economic system, destiny studies can discover the long-time period implications
and persistence of these outcomes. Expertise the duration and value of the real economic
outcomes can offer treasured insights into the process of recovery and tell policy responses past
the immediate disaster period.

5. Comparative Analysis: The study's findings may be primarily based on aggregated records
from multiple international locations or areas. Destiny studies can behavior more specific
comparative analyses across distinct nations or areas to look at the

Versions within the impact of monetary crises at the actual economic system. This can assist pick
out contextual factors and policy responses which might be effective in specific monetary
environments.

Ordinary, while the take a look at contributes to the information of the effect of financial crises
on the real economic system, there are several capability regions for future studies that may
further decorate our knowledge and tell more focused coverage interventions and business
strategies.

12. Timeline

A Gantt chart or timeline outlining the key tiers of the studies assignment might be advanced to
offer a clean evaluation of the studies technique, consisting of literature evaluation, statistics
collection, evaluation, and record writing.