IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: CONCLUSION AND IMPLICATIONS OF THE STUDY

In case of China, we can easily observe that probability of F-statistic is less than the level of significance in all the years of financial crises which leads towards the rejection of null hypothesis (H0) and acceptance of alternative hypothesis (H1) i.e. Break point was discovered in the GDP growth; hence all the financial crises caused damage to the economy of China. These findings are summarized below. It is evident from the graphical overviews and statistical results that China faced more financial crises as compared to the Pakistan. The interesting fact to be noted here is that China was established two years later than Pakistan and its economy faced more external financial blows but yet has successfully managed to become the second biggest economy of the world. Another notable reality about China’s economy is its quick recovery after all the five financial blows discussed in our study. Moreover, the recovery was not in terms of positive GDP growth rather it was remarkable to maintain the same pace so quickly. To know the comparative economic performance during these crises, let’s have a look on the decade-wise GDP growth of both countries. Despite the fact that Chinese economy faced hard times during all the financial crises, its decade-wise GDP growth percentage is lower than Pakistan only in the 1960s and in all other decades, Pakistan is nowhere near to its growth rates. Pakistan was not hit by the financial crisis 1979 and 2008 but its GDP growth of 1980s to first decade of the twenty-first century is still far away from China who faced these crises. It leads towards the opinion that there were other issues which proved harsher than the external financial crises for Pakistan. Following are the most eminent internal issues of Pakistan during the time period of 1951 to 2008. It is translucent from the above given details that Pakistan went through severe devastations internally. Unluckily, this nation lost its eastern part (now Bangladesh), faced four martial laws and equal number of wars during its 64 years’ history and went to the edge of a nuclear war as well. Incapable and corrupt leadership was another misfortune of this country.
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IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: IMPACT OF GLOBAL FINANCIAL CRISES ON CHINA

IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: IMPACT OF GLOBAL FINANCIAL CRISES ON CHINAA. Chow Break point Test for Pakistan and China’s GDP growth
Chow Break point Test is used by the many researchers to find out the structural breaks of the relationship studied; see for example Guidolin & Tam who analyzed the effect of global financial crisis 2008 on the yield spreads and found, by applying Break point tests, the breaks in yield caused by this crisis. Chow & Wang also applied the Chow Test for analyzing the parametre stability while studying the inflation in China. The same test i.e. Chow Break point test is used by Mukhopadhyay & Pradhan for identifying the structural breaks in the finance-growth relationship of Indonesia. Last but not least, Hossain employed the Chow break point test and found a structural break in the money-demand relationship for Indonesia caused by the Asian financial crisis 1997.
The variations of GDP growth for Pakistan and China are analyzed by Chow Break point Test in our study too. Aforementioned five financial crises are observed by this methodology to conclude which of those hit the economy of both nations. GDP Growth (GDPGR) and Time (T) are the variables used. For each of the financial crisis, a separate equation is constructed for examining the relationship of GDPGR and T. Afterwards, the stability of all those equations is measured by the Chow break point test. The conclusion from Chow test is based on hypothesis testing which consists of the comparison of the probability of calculated F-value with Fa (a = 0.05).
If the probability of calculated F-value is greater than Fa (a = 0.05), then accept the null hypothesis (H0) i.e. there is no break point in GDP Growth.

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IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: IMPACT OF GLOBAL FINANCIAL CRISES ON CHINA

After starting the journey in 1949, the economy of China faced many ups and downs. At the time of first three global financial crises, as shown in Figure 2 below, there were quite hard times for its economy. During the reign of Mao Zedong, economic relations with outer world were not that much but his ancestors, Deng Xiaoping especially, decided to open the doors of China for whole world in 1978 (MacFarquhar, 1987). The rainy days of Chinese economy are no more now and its economic growth plus position among economic giants is an open secret. It is observable in Table 2 that China was going impressive in terms of economic growth during 1950s but GDP growth percentage went deep down (i.e. -27.30% in 1961) as a result of the global financial crisis 1958. Its economy again faced the negative GDP growth after the global financial crisis 1974. During the Asian financial crisis, China successfully avoided the negative GDP growth but the crisis interrupted this pace of growth by lowering it down from double figures to single digit. It happened again in the next decade when global financial crisis 2008 smacked down most of the economies.

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IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: GLOBAL FINANCIAL CRISES IN THE HISTORY OF PAKISTAN

IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: GLOBAL FINANCIAL CRISES IN THE HISTORY OF PAKISTANFacts show that internal matters e.g. political instability, flaws in formation and implementation of indispensable policies, regular hostility with India and weak law and order conditions caused greater financial and economic damage to the country as compared to external shocks and global financial crises. From 1950 to 2000, except first decade only, Pakistan’s average GDP per decade remained higher than global average. Especially during second decade after its establishment, Pakistan’s financial and economic position was emerging really impressive (See Figure 1) but afterwards it became a part of the history and there is absence of any hope until now.
After being hit by Asian financial crisis during last years of twentieth century, Pakistan was already going through deficits when ongoing financial crisis erupted and situation became worse with the impacts of this catastrophe. Initially, no big shock was observed but effects were clearly visible later on and default was hardly avoided by financing from IMF. First three of the seven global financial crises (i.e. crises of 1857, 1873 and 1929), as studied by Draz, are not related to the Pakistan since independence was achieved from the British rule in 1947. The economic growth during inaugural decade of this newly established country was just 3.5% per annum and more emphasis was given to the refugees, constitution and political issues. Dr. Ishrat Husain, former governor of State Bank of Pakistan, describes this preliminary decade as ‘Flat fifties’ and asserts the divided geography (i.e. East and West Pakistan) as a severe matter right at the foundation time. The impact of financial crises on Pakistan’s economy is discussed below:
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IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: LITERATURE REVIEW

There is ample amount of research available regarding Pakistan’s economic fluctuations, policy matters and the factors affecting the economy. Among the most prominent works is the exploration of Arby who studied the ups and downs of economy by decomposing the GDP of Pakistan and through business cycle movements; his work shows the expected rise in GDP growth from fiscal year 2001. Another remarkable work is done by Husain, the former Governor of State Bank of Pakistan who summarized comprehensively the six decades of Pakistan’s economy and how it was affected by the politics and other factors. His work generally notifies the economic history of the country but the specific issue of impact of financial crises is not included. The work of Khan is notable regarding the problems in policy implementation which caused great damage to the economy of Pakistan when it was facing crises. Another distinguished study regarding the dilemmas of Pakistani economy is done by Martin and Kronstadt; they summarized the economic problems of Pakistan and relevant suggestions for the U.S. policy.
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IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: INTRODUCTION

IMPACT OF FINANCIAL CRISES ON PAKISTAN AND CHINA: INTRODUCTIONFinancial crises are not a new phenomenon; rather world’s history is replete with them. It has been observed that besides its numerous virtues, globalization, starting from early years of nineteenth century’s second half (Eichengreen & Bordo, 2001), changed the nature and impact of financial crises. Highly connected financial markets proved very useful in many aspects but fell an easy-prey to the drastic dangers as well. In earlier centuries prior to globalization, if there was any default or financial epidemic, it was limited to few nations or a continent only but the situation was radically changed with the steady spread of globalization. Currently, not only sound of financial blow is heard worldwide but it actually thrashes the globe too within no time. Recent global financial crisis which started from the United States but traumatized almost all the nations is the best example in this matter. This calamity not only had severe impact in the origin but also left profound marks almost everywhere in the world.
The prime reason of this comparative study about Pakistan and China is the fact that both of the nations are developing countries and on this ground Ma & Jalil have made the comparison of both countries’ financial development, economic growth and adaptive efficiency while Shah, Yuan, & Zafar have also conducted the comparative analyis of Pakistani and Chinese listed companies. Another fundamental reason of this comparison is the life-span of both nations after being established i.e. Pakistan achieved freedom in 1947 while Peoples’ Republic of China was founded in 1949, so both nations had almost equal time to to lay-down the sound brass-tacks and to flourish their economies. As far as the impact of financial crises on Pakistan and China is concerned, during six decades of their foundation, as asserted by Draz, both nations have experienced equal number of financial crises i.e. four out of the seven global financial crises and one severe Asian crisis of 1997 which is another key factor making these two countries comparable for our study.
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A Study of the Strategic Responses of Turkish Airline Companies to the Deregulation in Turkey: Discussion

A Study of the Strategic Responses of Turkish Airline Companies to the Deregulation in Turkey: DiscussionHowever, private airlines not only changed their corporate strategies, but also developed new competitive strategies with which they have been able to compete within the new framework in the domestic airline market. Thus, they have tried to support their corporate strategies. Borajet is the only exception to this, in the sense that its area of activity, in other words, its corporate strategy was presented as scheduled domestic transportation since the beginning, and this was how it found itself a place in this market with its competitive strategy.
As we consider the competitive strategies implemented by airlines, we can say that, with the basic logic it has, Onur Air aims to execute a cost leadership strategy although it does not embody some of the certain elements mentioned in the literature. Atlasjet is thought to have developed a differentiation strategy focusing on a narrower geography as a response to deregulation. Pegasus Airlines, unlike Onur Air, has developed a strategy closer to the cost leadership strategy mentioned in the literature. SunExpress, on the other hand, is executing a mixed strategy by having blended three strategies, namely the cost leadership, focus and differentiation strategies and adopted relevant practices from them that would create customer value. As for Borajet, it takes regional airline transportation as the model and adopts a focus strategy.
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