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.
When we look for the literature with reference to the impact of financial crises on Pakistan, Sheikh and Gopang analyzed the impact of global financial crisis 2008 on the poverty in rural part of Sindh province of Pakistan and compared it with other provinces. Moreover, Haque described the causes of financial distress in Pakistan and steps taken for the economic management of this catastrophe. Both of these papers are limited to the global financial crisis of 2008 only so there is a need to study the impact of other financial crises on Pakistan’s economy.
There might be plenty of literature available in Chinese language but as far as impact of financial crises on China is concerned, we found a severe lack of English work in this subject. Among the available studies, Schmidt enumerated the short term and long term impacts of financial crisis 2008 on China. Chow & Li used the Cobb-Douglas function to study the growth of labor, capital and total factor productivity with special reference to China. They conducted their analysis from 1952 to 2010 but this work only covers the economic growth aspect and the impact of financial crises on China is still missing.
Among the comparative studies about Pakistan and China, most of the literature addresses the issues of strategic relations, military and defense cooperation. One of the most prominent work regarding finance and economy is done by Ma & Jalil in which, by testing finance-fluctuation nexus hypothesis, they have observed the decrease in macroeconomic volatility as a result of improvement in financial markets for Pakistan and China in specific, while for all the developing countries in general. This paper is proposed to bridge the gap of literature about the following aspects:
1.    Which nation (Pakistan or China) was affected greatly by the external financial crises?
2.    What were the core reasons that Pakistan is left way-behind in the economic prosperity as compared to China; was it due to external financial crises or internal issues?