The Great Recession of 2008 and the Impact of the Global Crises On Local Governments

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The Impact and Causes of the 2008 Financial Crisis

In 2007, a global financial crisis rapidly gained traction from the crash of the United States housing market to the worst recession the world had witnessed in over six decades. Through an in-depth review of the crises in terms of causes, consequences and policy responses, this paper identifies the impact on Local Governments on both the revenue and expenditures side of the budget. Contrary to widely-held perceptions during the boom years before the crises, the global economy was by no means as stable as suggested, while at the same time the majority of the poor had benefitted insufficiently from stronger economic growth. There were complex and interlinked factors behind the emergence of the crises in 2007, namely loose monetary policy, global imbalances, misperception of risk and lax financial regulation. Beyond the aggregate picture of economic collapse and rising unemployment, this paper stresses that the impact of the crises and immediate effects on local government budgets will decrease revenues and expenditure for some time to come. The recovery phase will have a number of risks that could derail improvements and hinder efforts to create jobs and stimulate the local economies. These challenges include dealing with public debt and maintaining infrastructure projects and full employment in local governments. (The Great Recession of 2008-2009: Causes, Consequences and Policy Responses by Sher Verick and Lyanatul Islam)

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The Great Recession of 2008 and the Impact of the Global Crises On Local Governments

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