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Global Financial Crisis and Its Influence on the Effectiveness of MNE Operations

Significant changes have already been made in financial policies. Organizations have also changed their strategies in order to cope up with the losses that are made due to this turmoil. This paper helps to have a clear understanding of the recent global financial crisis and its nature. Moreover, it also gives a fair idea about the way in which the financial crisis has influenced the effectiveness of the operations of multinational corporations.In the latter half of 2008, the biggest financial crisis since the Great Depression started off its journey. Over the next few months, billions of investments that were related to mortgage went bad. Mighty investment banks that used to dominate the financial market were either collapsed or were reinvented as commercial banks. The place of origin of this crisis was the US and it is the most affected country by this financial turmoil so far. US government seized the country’s largest insurance company (AIG) and the largest lending company (Washington Mutual). A huge amount of money was pumped into the system by the Federal Reserve. A 700 billion dollars bailout plan was passed by Congress. Such actions prevented a full-scale meltdown. The crisis, however, spread throughout the globe, causing the collapse of banks around Europe and forcing countries from Pakistan to Iceland to seek emergency financial support from the International Monitory Fund. A ferocious circle of reduced demand, rapid job cut and tightening credit was formed and the global economy got into recession (The New York Times, 2010).In 2009 most of the countries took steps for stimulating their economies. In the US a stimulus package of $787 billion was passed. China also undertook a $500 million stimulus plan. Central banks of various countries cut interest rates. Federal Reserve however took an extraordinary step by purchasing mortgage-backed securities worth more than $1 trillion. Automobile giants like Chrysler and GeneralMotors were forced by the government to declare bankruptcy.

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