An Analysis of Macroeconomic State and Prospects of Pakistan during Recent Global Financial Turmoil

Abstract

The overall economic situation of the world is facing a threat with a deep and prolonged recession as the consequence of the squeeze in the fiscal system which was triggered by housing mortgage crisis in the United States. The importunate financial ramification of the worldwide macroeconomic inequality smoothed the progress of the expansion of the housing fizz with the amplification of toxic assets that burst in September 2008 as many of the major investment and commercial banks and leasing institutions collapsed. This study aims to contribute in summarizing these events and the diffusion of this financial turmoil through the advanced economies like United States and the Eurozone to the developing economy of Pakistan. The paper analyzes specifically Pakistan’s current macroeconomic situation during this financial crisis. It also discusses the consequences of the surge in food and oil prices. This study also evaluates the government’s response to the deteriorating conditions and proposes a number of policy measures