Root: Mispricing in the Massive Credit Default Swap Market

Sub prime Mortgage: Bank transferred credit risk to third party through the process of securitization

Reckless growth of sub prime mortgage-lower yield in risky mortgage

Expansion of consumer credit, housing price bubble Housing bubble burst mortgage default foreclosures bank and insurance failurecredit freeze

Sharp fall in the stock market price around the globe, current stock prices are unable to explain the value of the companies. Like Lehman Brothers Spillover of financial crisis to real economy through virulent credit crunch depressed aggregate demand

 The

purpose of the study is to analyze and understand up to what extant the global financial meltdown will affect Bangladesh, especially on its Foreign Direct Investment (FDI), export, import and remittance.

Methodology:
The study has been conducted based on secondary source of information mainly newspaper articles, economic journals and reports.

Limitation:
Though enough articles have been published and interviews have been broadcasted on the global financial meltdown but the studies conduct on the possible impact of the melt down in Bangladesh are conducted in year 2008 2009, thus gathering recent data was troublesome

The countrys capital market is far from the shock - it would only get hit when other areas of the economy are affected as it has a very little linkage with the foreign portfolio investment, and there is hardly any listed company involved in export business. Therefore in the short-term it would not affect the stock market as the foreign portfolio investment share is only less than 1 percent of the total market capitalization.

Bangladesh Banks investment from the reserve was invested in the central banks of other countries or in the government bonds of other countries therefore n be assumed that the risk is limited and therefore credit line of commercial banks to foreign banks or financial institutions and their investment would be very meager

Unlike many other countries, the global recession of 2008-09 was not an unmixed curse for Bangladesh. The principal adverse effect of the recession was a reduction in export revenue in 2009 on the back of a very high growth of 23 per cent in 2008. However, Bangladesh was spared the traumatic export reduction in other countries; its export declined by only 2.0 per cent. It compares rather well to the reductions of 16-35 per cent suffered by exporting giants such as the European Union (EU),

China,

USA,

India,

Brazil,

Canada

and

Japan

Floating Exchange Rate regime makes the country exposed

to exchange rate risk with global shock. The domestic inflation rate has already pushed up In this situation, a coordinated deployment of fiscal and monetary policy is essential. Monetary policy is already exhibiting signs of laxity. The large balance of payments surplus is also making monetary policy difficult. Indeed, if

the policy-makers stick to the current policy of keeping the

exchange rate of taka against dollar fairly constant, as it has done in the recent past, monetary policy will lose its potency altogether

There is unlikely to be any direct immediate impact on remittances. Remittances in Bangladesh proved to be resilient during previous financial crises in the world. The bulk (over 60 percent) of Bangladesh's remittances come from the Middle East. Strong remittance growth (44 percent) has continued in the first quarter of FY09. However, if a deep and protracted recession ensues in the US and EU, then the Middle-Eastern economies are likely to be adversely affected. Stock markets in important Middle-Eastern economies have already started to crash. Even if the current nearly $8 billion level of remittances is sustained, it would be challenging to maintain its growth momentum since 2001 if the world economy remains depressed for an extended period.

If there is a lesson to be taken from this crisis it is a simple and old

rule of economics: there is no free lunch. If one wants something one has to pay for it. Debt is not a bad thing. Used responsibly, it is at the heart of modern capitalism. But hiding mountains of debt in

complex instruments is a way to disguise costs, an invitation to

irresponsible behavior. At some point the, magical accounting had to stop, consumers had to stop using their homes as banks and spending money they didnt have. The Us and overleveraged

societies have gotten their wake up call. If we dont panic and

respond with patience and efficiency then this whole scenario might be a blessing in disguise for us.