...government effects by policies, exchange rate and capital mobility are key factors of today’s macroeconomics. Today’s economists are also discussing that situation deliberately to show the importance of that to the world. For instance, if we discuss the centre countries’ monetary policies, we can easily show that in the international trade monetary policy becomes more valuable for them than other countries. In addition to this, floating exchange rate regimes and sustainability of exchange rate are further important discussions to focus. Therefore, monetary policies and their effects on world are strictly connected each other which can be easily analysed thus far. In my response paper, I will give the analysis of the two paper; Helene Rey’s Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence (2013) and Obsfeltd, Shambaugh and Taylor’s The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies and Capital Mobility (2004). Firstly, I will give the summary of this two papers and secondly, argue and compare two papers. At final, I will discuss the important points at my point of view. Summary of two papers; Dilemma and Trilemma First of all, “impossible trinity” aka “trilemma” had a great impact in macroeconomics. So many economists are still discussing its importance and writing papers about its importance. In Obstfeld, Shambaugh and Taylor’s paper (2004), they analyse the trilemma’s perspective and carry that in macroeconomic world. ...
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...AVUTIA LECTURER. MR CHARLES MAKANYEZA Due date; 15th October, 2012 Question Two Discuss the various factors that determine the exchange rate regime. Introduction This paper is an attempt to discuss various factors which determine the exchange regime in relation to the international trade. The paper will provide a brief overview of the exchange rate regimes in the international trade, define key terms. It will also explore the various types of exchange rate regime practiced in the international and finally it will delineate the main factors that determine the exchange rate regime. Overview of exchange rate in the International trade. The choice of an appropriate exchange rate regime for developing countries has been at the center of the debate in international finance for a long time. The steady increase in magnitude and variability of international capital flows has intensified the debate in the past few years as each of the major currency crises in the 1990s has in some way involved a fixed exchange rate and sudden reversal of capital inflows. While the debate continues, there are areas where some consensus is emerging, and there are valuable lessons from earlier experience for developing countries. Selection of an exchange rate regime that is most likely to suit a country’s economic interest would depend on a variety of factors as discussed bellow (Yagci, 2001). Definition of Key terms Exchange Rate. Exchange rate refers to the value...
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...Chapter 12 - Macroeconomic and Industry Analysis CHAPTER TWELVE MACROECONOMIC AND INDUSTRY ANALYSIS CHAPTER OVERVIEW This is the one of three chapters that covers fundamental security valuation. This chapter introduces a topdown approach to fundamental security analysis. It covers the first two components: macroeconomic and industry analysis. The textbook begins with a global analysis, particularly with respect to how the performance of domestic firms is influenced by international economic performance. The chapter’s main focus however is on aspects of the U. S. economy that affect security returns, including fiscal and monetary policy. In addition, a brief presentation of the determinants of interest rates is covered. The chapter concludes with a discussion of industry analysis that includes classifications of industries, information sources, the industrial life cycle and a Porter framework that can be used to analyze industry competition. LEARNING OBJECTIVES Upon reading this chapter, you should have a basic understanding of some of the macroeconomic factors that affect security prices. That is, how fiscal and monetary policy affect interest rates and security prices. And some industry groups are more affected by macroeconomic factors than others and the characteristics of an industry that affect its competitiveness. CHAPTER OUTLINE The top-down approach to fundamental analysis begins with analyzing the economy. Expected economic performance will influence...
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...Macroeconomics January 16, 2013 Meriem Boulhimez FINAL EXAM Microeconomics is the section of economics that concerns single factors and the effects of individual decisions. It is commonly known to be the study of individual decisions of a single business entity. It consists of analyzing the price of a particular product, the capacity production of a product, and how the price of each product in the market is affected by the forces of supply and demand. It considers regulations, taxes, and analyzes markets in order to effectively set a value for a specific good or service. The decisions made on a microeconomic level are very pinpointed and precise. The outcome directly affects the supply and demand chain as well as other forces that determine the price levels seen in the economy. For example, microeconomics would access how a specific business could maximize its production so it could lower prices and compete more fiercely with its competitors. In order to come up with these solutions, microeconomics considers various variables such as the relationship of a firm with the market and the appropriate price of a product to maximize profits. On the other hand, Macroeconomics is a broader study that involves the economy as a whole, not just one particular company since it assesses entire industries. For example, macroeconomics covers subjects such as an economy’s GDP and how it is closely linked to unemployment rates, since they mutually influence one another. Besides...
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...Macroeconomics Assignment How a rigid Fiscal Policy saved Australia from the Global Financial Crisis TABLE OF CONTENTS: |Item |Heading |Page Number | |1. |Introduction | | |2. |Theoretical Concepts: | | | | | | | |2.1 Economic Growth | | | |2.2 Aggregate Demand and Aggregate Supply | | | |2.3 Fiscal Policy | | | |2.4 Monetary Policy | | | |2.5 The Impact of Unemployment | | |3. |Related Policy Issues | | |4. ...
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...1. Critically examine the effectiveness of various approaches that may be used to reduce macroeconomic instability. According to Mc Vaish (Macroeconomics theory, p123) Macroeconomics can be defined as the analysis of the economy wide aggregates such as the analysis of the total output and employment, total consumption, total investment, total saving and national product. Macroeconomic theory employs technique of general equilibrium in order to study the determination of the general price level, money supply, total employment and output levels and fluctuations in these aggregates magnitudes. A macroeconomic stable environment can be defined as one in which inflation is low and predictable, the exchange rate is near its equilibrium level, the government budget is well managed, the budget deficit relative to GDP is at a reasonable level and the use of central bank credit to finance the budget deficit is kept at a minimal level. Macroeconomic stability sends important signals to the private sector about the direction of economic policies and the credibility of authorities’ commitment to manage the economy efficiently. Such stability, by facilitating long term planning and investment decisions, encourages savings and capital accumulation by the private sector. Macroeconomic instability takes place in two forms namely exogenous shocks and inappropriate policies. Exogenous shocks (such as reversal capital flows, terms of trade and natural disasters) require compensatory action...
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...journal homepage: www.elsevier.com/locate/ecmod The effects of fiscal spending shocks on the performance of simple monetary policy rules Ali K. Malik ⁎ Karachi School for Business and Leadership (KSBL), Bahadurabad, National Stadium Road, Karachi 74800, Pakistan a r t i c l e i n f o Article history: Accepted 26 August 2012 JEL classification: E50 E52 E58 Keywords: Fiscal policy Monetary policy Inflation targeting Impulse response analysis Macroeconomic variables 1. Introduction a b s t r a c t We examine the effects of fiscal shocks on the performance of alternative monetary policy rules in a small dynamic general equilibrium framework. We explicitly consider the interaction between fiscal and monetary policy rules which may be present in the real world. We use a simple specification for the fiscal policy rule and various specifications for the (simple) monetary policy rule. Our analysis suggests that some form of flex- ible inflation targeting regime would perform well in response to fiscal shocks compared to other forms of policy regimes. © 2012 Elsevier B.V. All rights reserved. monetary policy has developed largely in isolation. The terminology ‘fiscal theory of the price level’ does however correspond to some ear- Monetary policy rules have come under extensive examination in the literature on monetary policy in the recent years. Simple mone- tary policy rules appear to be more robust across a wide range of models...
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...Of Nigeria A macroeconomics problem facing Nigeria, and the most disturbing, is the problem of inflation. As a result of its growing rate, Nigerian government is concerned about its impacts on her economic growth. To place an order for the Complete Project Material, pay N5,000 to GTBank (Guaranty Trust Bank) Account Name – Chudi-Oji Chukwuka Account No – 0044157183 Then text the name of the Project topic, email address and your names to 08060565721. Many authors have written on Impacts of inflation on Nigerian economy, but the authors have different views because inflation analysis, nevertheless, one thing common is that all the authors agree that inflation has Impact on Nigerian economic growth. Samuelson (1973), defines inflation as “a general rising prices for breeds, cars, haircut, rising wages, rent etc. Onwukwe (2003), on his side defines inflation as “a significant and sustained rise in the general price level or a declining value of the monetary units. The problem created by the rising prices of goods and services has become two difficult for government to solve. During inflationary period, fixed amounts of money buy less quantity of goods and services. The real value of money is drastically reduced i.e the purchasing power of consumers are reduced. The Impact of rapid inflation growth has led the federal government of Nigeria to adopt several sexual measures of inflation control. Paramount among these measures are monetary and credit policies formulated restore...
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...Expansionary Economic Policy Clinton Dullin Eco203: Principles of Macroeconomics Evelyn Carlson 9/1/02014 The government in times of economic recession has responsibility to take action, engaging in expansionary economic policies is the action my paper will discuss. The types of economic expansion include Fiscal Policy, and Monetary Policy, the expansion of the two policies allows the government to adjust taxes, and government spending. Harry Truman once quoted “It’s a recession when your neighbor loses his job: it’s a depression when you lose yours.” (The economy perspective, the banker's banker. (1998, Jul 29). When recession hits the first party that is blamed is the government, so there ability to take action is a sign of them taking responsibility. Government action is necessary to right the recession ship, expanding Fiscal, and Monetary Policy may very well be the answer. The first topic of discussion is Expansionary Fiscal Policy and how the government uses the policy to affect the economy. Expansionary Fiscal Policy is a type of policy which includes increase in government purchases, a supple decline in taxes, while making an increase in transfer payments. These changes are designed to close the recessionary gap, while increasing economic stimulus packages and they aim to decrease unemployment. The government will introduce Expansionary Fiscal Policy during anticipation of contractions in the business-cycle. Increase in government spending will increase...
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...com/blogs/freeexchange/2013/09/generations INFLATION, like demand itself, is always and everywhere a monetary phenomenon. Milton Friedman was right about that. But while that's a useful thing to know it's not always the answer to the question we're really asking about macroeconomic troubles. If you ask what America's main macroeconomic problem is at the moment, one correct answer is that it's suffering from a demand shortfall associated with inadequately expansionary monetary policy. But that doesn't really tell you what you need to know, which is why monetary policy is insufficiently expansionary. Is it an intellectual failure? An institutional or technical problem? In the same way, saying the Great Inflation of the 1970s was a monetary phenomonenon is true and important but also unsatisfying to some extent. The really interesting question is why monetary policy permitted the inflation. There is surely some truth to the standard explanations. Some reckon the trouble was due to a Keynesians wandering into an intellectual cul-de-sac, in which there was always and everywhere a trade-off between inflation and unemployment. The Great Inflation was therefore a result of efforts to pump up demand and bring down unemployment even as the economy approached its resource limits. Once the inflation was in place Keynesians argued it was down to "cost push" factors like rising labour costs, such that monetary policy couldn't rein inflation in and needn't try. Others point to political dynamics, in particular...
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...as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States Table 1-1 1996–2006 (average) 2006 2007 2008 3.1% 3.4% 3.3% 2.1% 2.5% Output growth rate Unemployment rate 6.2 5.0 4.6 4.6 4.8 Inflation rate The unemployment rate 4.0 2.0 2.9 2.6 2.2 Output growth rate: annual rate of growth of output (GDP). Unemployment rate: average over the year. Inflation rate: annual rate of change of the price level (GDP deflator). 3 of 18 Chapter 1: A Tour of the World The inflation rate The period 1996-2006 was one of the best decades in recent memory: The average rate of growth was 3.4% per year. The average unemployment rate was 5.0%. The average inflation rate was 2.0%. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States 4 of 18 1-1 The United States Has the United States Entered a New Economy? Should We Worry About the U.S. Trade Deficit? Figure 1 - 2 Figure 1 - 3 Rate of Growth of Output per Hour in the United States Since 1960. The U.S.Trade Deficit Since 1990 The trade deficit increased from about 1% of output in 1990 to about 6% of output in 2006. The average rate of growth of output per hour appears to have increased again since the mid-1990s. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard ...
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...“Hyper inflation is both a monetary and fiscal phenomenon” In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of monetary and price inflation, causing the population to minimize their holdings of money. Under such conditions, the general price level within an economy increases rapidly as the official currency quickly loses real value. Meanwhile, the real value of economic items generally stays the same with respect to one another, and remains relatively stable in terms of foreign currencies. This includes the economic items that generally constitute the government's expenses. There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless. Hyperinflation is often associated with wars, their aftermath, socio-political upheavals, or other crises that make it difficult for the government to tax the population, as a sudden and sharp decrease in tax revenue coupled with a strong effort to maintain the status quo can be a direct trigger of hyperinflation. When associated with depressions, hyperinflation often occurs when there is a large increase in the money supply not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money. Left unchecked this causes prices to increase, as the currency loses its...
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...This course was an introduction to the principles of macroeconomics. In learning how to analyze the purpose and functions of national income accounting, the components of Gross Domestic Product, the determinants of long run economic growth and the causes and costs of inflation and unemployment on our economy. By implementing graphs to interpret these principles and the economic outcomes I have learned to determine how markets allocate resources, analyze the components of the Gross Domestic Product and what the conditions required to promote long term economic growth would be. In the following summary I will be investigating a current event and composing an essay to identify a minimum of three economic concepts that I have gained knowledge about during my journey through the macroeconomics realm. The data basses I used in conducting this essay were the web sites of the Wall Street Journal and the News Week home age along with the Kaplan Library. I used goggle to locate the first two at which point I came across several other sites that when I typed the key word” economics” or “microeconomics “brought me to several sites. At which time adding another key word” current events” seemed to narrow down the sites that were originally displayed. After a search of the theses different site I had decided to use the Kaplan source as my main focus it was much easier to maneuver around and offered a better selection of articles. This is where I found most of the research I needed for...
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...Macroeconomic Analysis: Project II Class: ECON545 4/12/2011 Introduction to Situation The paper analyzes and summarizes how the automotive industry is impacted by the macro economy. In helping my friend Rick expand his small manufacturing plant that produces parts for the auto industry, I’m going to identify a brief history of the automotive industry, how it impacts the GDP, the unemployment rate, and the inflation rate as measured by the Consumer Price Index (CPI). The supply and demand of the automotive industry as well as the profits derived from the sector are clearly impacting by then macroeconomic policies. The industry’s history demonstrates the trends it follows in the business cycle and how economic indicators have impacted the performance of the industry over the years. The measure of production, interest rates, real GDP, automotive sales and inflation and unemployment are some of the most compelling instruments that can be used to assess the state of the automotive industry. Business Cycles The U.S automotive industry saw a steady expansion from its inception until 1978 in which where production reached its all-time peak. The industry showed a small contraction and a quick recovery leading to its peak between 1972 and 1976. In the early 1980 there was a big drop in production units and the industry fell into its first true recession. The industry recovered in the mid 80s peaking in 1988, but never reached its previous high before falling into...
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...economic, social and global environment 9 A) Real Life Example on command, free enterprise system and a mixed economy 9 Example one 9 Example two 10 Example three 10 B) The Effect of Government Fiscal and Monetary Policy 11 Physical policy: 11 Monetary policy: 13 C) Competition Policy 13 Task 3- The Behaviour of Organisation in their Market Environment 14 A) Market Structure Types 14 Pure competition : 14 Monopoly competition: 14 Oligopoly 14 C) Business and Culture Environment Shaping BT 15 Task4- The Significance of the Global Factors that Shape National Business Activities 15 A) International Trade 15 B) Global Factors 15 C) Macroeconomic Concerns 15 References 17 Appendixes 18 Business Environment Introduction Task 1- Understand the Organisational Purposes of Business A) The main purposes of business This section will identify and explain in detail the main purposes of organisation in the following businesses: * Local councils * Small businesses * Multinational corporations * British Telecom Local councils The local council is non profit organization where their target is to provide the services to the community and most of them do not charge direct fees except some services. However, they take it through tax policy by the local government, as well as paying fine for illegal activities. For example, according to Westminster Council you will be fined up to £100 if you didn't follow the rules for cyclists...
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