Global Financial Meltdown – Systematic Literature Review A Qualitative Research Study

Abstract

Global Financial Meltdown was a major economic crisis in the recent past. It had devastating effects throughout the world. A clear understanding of the global financial meltdown is very necessary as it raised lots of concerns on the contemporary financial system. The complexity of this crisis event demands a detailed descriptive analysis for its understanding, which cannot be captured through a mere quantitative study. We have to see this economic crisis from various perspectives and angles, for which systematic literature review approach is used in this study and the global financial crisis is taken as an intrinsic case. Taking different perspectives of various researchers, thinkers and intelligentsia will also help in driving out an unbiased and factual view of these crises. The financial meltdown started from subprime crises. Financial derivatives and securitization were the main elements of the subprime mortgage. Financial derivatives are innovative financial products, whereas securitization is the process of converting mortgage loans into tradable securities. The unprecedented volume of derivatives trade and multiple cycles of securitization within a short span of time caused subprime crises in the USA. Since lots of financial institutions from various parts of the world have stakes in subprime mortgages, therefore resonance of subprime crises traveled across the globe. The shrinkage of profits forced financial institutions for rapid divestitures of investment from stock markets, which caused a dramatic drop in indices. This scenario destabilized numerous companies and dire effects of financial sector spilled over to other economic sectors in the various economies of the world.