The Global Financial Crisis Essay - 3569 Words

1. Introduction 1.1. Background The Financial crisis was triggered in 2006 when US housing market began to crumble as the housing price reached their highest point after years of speculative price increase; many house owners defaulted on their loans, particularly subprime mortgagers (Archarya et al., 2009). Starting in mid-2007, the outburst of US housing bubble in the subprime mortgage leads to the global financial crisis that has been often so called ‘Great Recession’ (Verick and Islam, 2010). Archarya et al. (2009) states that it is widely agreed that the fundamental cause of this global financial crisis was the credit boom and the housing bubble. While Poole (2010) argued that it is a mistake to only take subprime mortgage issue†¦show more content†¦2. Impact of Recession on Customer Behaviour The financial crisis and economic recession of 2008 unevenly affected economic aspect of countries, industries and extended into social aspects, which include how the public responded to the recessionary circumstances surrounding it (Gangl et al., 2012). This chapter focus to understand how the current economic depression shapes the customers behaviour. Earlier research by Desvaux et al. (2009) found that the recession had led to lower consumer confidence, lower income due to high unemployment rate, higher living cost because of inflation, lower wealth due to shrinking in household wealth and restricted consumer credit as bank cut lending to consumer. The above five factors have shaped consumer behaviour in responding to the recession as follows (Desvaux et al., 2009): †¢ Control spending: this is the most common reaction during recession; people would have their own budgets to reduce their overall spending such as eating out and travel plans. †¢ Replace only when needed: consumers were willing to delay their new purchases of cars or electronics and extend the lifetime of the current assets. †¢ Shop smarter: people have begun to look out for promotions and special bargains, or use internet to find better or lower price. In addition to the above behaviours in responding to theShow MoreRelatedThe Global Financial Crisis And The Crisis Essay1244 Words   |  5 PagesIntroduction The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. 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