Credit Crunch Assignment Example | Topics and Well Written Essays - 1500 words

Credit Crunch - identification ExampleThe focus throughout this constitution would be on assessing the resolution of Russia and India to combat the ruinout of the spheric financial crisis as well as examining where they differed and why they differed. The emphasis of this paper is on seeking the cardinal theory behind the responses from a macroeconomic post. It has been said that the rules of the game have changed after the onset of the world(a) financial crisis and many have even said that it is the end of the world as we know it. This paper tries to chthonicstand the responses of Russia and India to the crisis from the unique perspective of the policy makers as presented in the sources that have been consulted for this paper. Russias Response to the GFC When examining Russias response to the global financial crisis, it would be pertinent to note that above all, the Russian saving is heavy leechlike on exports of oil and this forms a significant percentage of the GDP for Russia. Since the Russian economy also has a dual financial system, which consisted of one part serving the households and the other part serving the corporates and remote markets, the Russian response were a twofold and two pronged calibrated one. This two pronged flak is explained further in the succeeding paragraphs. It needs to be mentioned that Russia was relatively prepared for the global financial crisis and and so its response to the crisis must be seen in this context (Sestanovich, 2008). On one hand, Russia opted for step-wise devaluation of its currency so as to bolster the real effective counterchange rate. As mentioned above, since the Russian economy was heavily dependent on exports of oil, the exchange rate at which oil was exported had to be adjusted to take into account the go in exports. Hence, the Rouble was devalued in a phased manner to make the necessary revaluation of the exchange rate so that the real rate at which oil was exported would be competitive to Russian exporters of oil. The merits of a gradual depreciation of the Rouble as opposed to a one-off devaluation can be argued from the theoretical perspective of a steep fall in the value of a Rouble to a calibrated fall thus giving economic agents ample time to adjust their assets (Sutela, 2010). The second part of Russias response was to release the contingency fund or the reserve fund to support the financial system that was reeling under the impact of outflow of funds and which was dependent on foreign markets for business. The point to note here is that the debt held by these banks was mainly short term in nature the reserve fund was never intended for long-term term stabilization and was mainly geared towards softening the fall in monetary revenue for the banks and the financial system. Further, the central bank could do little by way of monetary policy and it fell to the fiscal policy to support the financial system (Sutela, 2010). Indias Response to the GFC The Indian response to the Global pecuniary crisis was to provide stimulus and support to the economy by enacting three stimulus packages, one in celestial latitude 2008 and two more in Jan and Feb of 2009. The stimulus packages were also designed to rebuild confidence in the economy by easing the