...DEFINITION OF ECONOMIC DEVELOPMENT After searching through the literature, It was found that the following definition of Economic Development would be best suited for this study due to its compatibility with the scrutiny of a third world country, "The process of enlightening the quality of human life through increasing per capita income, reducing poverty, and enhancing personal economic prospects. It is also sometimes defined to include better education, better-quality health and nutrition, conservation of natural resources, a cleaner environment, and a richer cultural life" (Penn State University 2008). Hackett (2008) emphasized the role of the Government and its influence on Economic Development. THE VARIABLES OF ECONOMIC DEVELOPMENT This...
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...Hong Kong economy are that openness and freedom from foreign exchange rate and fiscal policy, reasonable economic policies, and non-interventional approaches to economic policymaking, and high trade volume. Even though government plays a minor role during the structural transformation and economic growth, it does not mean that government’s role is not important. In fact, government’s approaches help Hong Kong succeed in many ways. The first part of the essay will review brief background when Hong Kong was under British governance in 1950s and 1990s. Second part of this paper will investigate the rise of manufacturing in Hong Kong and during 1950s and 1960s. Third part of this paper will focus on the change in type of manufacturing during 1970s. Fourth part of this paper will examine the rise of financial sector in Hong Kong during 1980s to 1990s. In each of the periods, government’s impact on the economy will also be discussed. Hong Kong’s economy miracle between 1950s and 1990s is an excellent economic model to learn from for the rest of the world. Hong Kong government’s hands-off approach would also give guidance of economic development for other countries. Brief Background of Hong Kong Hong Kong is often considered a place where integrates the essence of both Chinese and western elements. Hong Kong’s unique characteristic was a result of colonial rule and economic development goes hand in hand. British occupied Hong Kong after Qin dynasty lost the Opium War in 1842, and...
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...The United States is enjoying an economic boom that is fueling the growth of its trade deficit. At current exchange rates, the strength of the U.S. economy, combined with slow growth in demand in many other parts of the world, will lead to further widening of the U.S. trade deficit. How long can the trade deficit continue on that trajectory without disrupting the U.S. economy or the world economy? Absent structural reforms in the United States and abroad, a large devaluation of the dollar, or significant changes in the business cycle, both the trade and the current account deficits will continue to widen until they become unsustainable, perhaps two or three years out. Changing the trajectory will be difficult. The U.S. trade deficit is now so large that even if world economic growth were to pick up and boost U.S. exports, U.S. imports would have to slow dramatically for the gap to narrow. To shrink the trade deficit significantly, say, over a two-year period, exports would have to grow twice as fast as they did in the 1990s, when growth averaged 7.5 percent a year, and the growth rate of imports would have to be halved, from 11 percent to 51/2 percent a year. Moreover, following twenty years as a net recipient of capital inflows, the United States will soon be confronted with much larger service payments. At some point, either the United States' negative net international investment position and the associated servicing costs will become too great a burden on the U.S. economy...
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...which utilizes actual economic data to estimate the impact of external shocks (e.g. policies, technology) to an economy. Gross Domestic Product (GDP): The total monetary value of all officially recognized final goods and services produced within a country in a specific time period. It is used as a key measure of economic growth. Gini Coefficient: A statistical measure of the income distribution of a country’s residents. It helps to identify the gap between the rich and poor. Total Factor Productivity (TFP): A measure, which represents the amount of output not directly related to the amount of inputs (e.g. materials). Economic planners look at these factors to explain growth of a corporate or national economy. Main Facts Hofman & Kujis argue that economic growth in China is not only reflected by GDP growth but also its sustainability should be considered. China’s economic growth has been exceptional, as it has lifted millions out of poverty. Overall, the Chinese population has prospered greatly, however the Gini coefficient indicates that there is a significant income disparity. Furthermore, the Chinese economy is heavily dependent on the manufacturing industry, investments and external demand. These three cause multiple negative externalities for the nation, such as environmental pollution, dependency on foreign resources due to high-energy consumption and income inequalities that cause social instability. Also, low employment- and TFP-growth, and a too narrow developed...
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...Macroeconomic Issues The macroeconomic issues that will be examined during this course are: 1) Economic Growth (change in the level of output) a) An outward shift in the PPC (production possibilities curve) due to an increase in the quantity or quality resources. b) An increase of real output (gross domestic product) or real output per capita. NB: Gross domestic product is the market value of all final goods and services produced within an economy for a given period. 2) Unemployment: The failure of an economy to fully utilise its entire labour force. 3) Inflation: A rise in the general level of prices in an economy. 4) The Balance of Payments: A summary of all the transactions that took place between the individuals, firms and government units of one nation and those of all other nations during a year. 5) Exchange Rates: The rate of exchange of one nation’s currency for another nation’s currency. A foreign firm would look at some key macroeconomic indicators so as to inform its decision as to whether or not it should invest in a particular country. These key macroeconomic indicators are: 1. Real Gross Domestic Product (Real GDP) 2. The unemployment rate 3. The inflation rate 4. The interest rate 5. The exchange rate 6. The level of the stock market Economic Growth and Business Cycles Economic Growth Economic growth has been defined generally as an increase in real GDP or real GDP per capita for a given time...
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...BACK TO BASICS What Are Structural Policies? Monetary and fiscal policies deal with short-term economic fluctuations, but an economy’s problems often go deeper Khaled Abdel-Kader E CONOMIES can get out of whack for a variety of reasons. Policymakers, in turn, have a number of ways to try to fix them, depending on what is wrong. For example, when prices are rising too fast and consumers and businesses are buying at a rate that exceeds an economy’s underlying ability to produce goods and services—that is, overall demand is growing too fast—policymakers can take steps to reduce demand. Similarly, during economic downturns, when businesses and consumers close their wallets—aggregate demand is shrinking—governments can take steps to encourage them to open their pocketbooks or substitute government spending for diminished private spending. Such government actions are called demand management or stabilization policies. Sometimes an economy’s problems are deeper and longer lasting than excessive or inadequate demand, usually as a result of government policies or private practices that impede efficient and fair production of goods and services—that is, supply. Fixing such problems can require changes to the fabric of the economy, called structural policies. Stabilization policies are important in the short run, because it is easier to alter the various components of overall demand for a short time than it is to make a country’s resources more productive. Stabilization...
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...“We will argue that global imbalances were the result of the large excess demand in the U.S. over an extended period—the financing of which was made possible by the reserve currency status of the US dollar. “This excess demand resulted from both the public debt” and “the overconsumption by households.” (Lin 2012, Treichel 2012, p.3) “As shock waves of the global financial crisis (GFC) reached East Asia in autumn 2008 immediately after the collapse of Lehman Brothers in September, the region faced the task of evaluating and reassessing the economic cooperation efforts of the previous ten years” (Katada 2011, p.274) Thus by evaluating and reassessing the economic cooperation of those previous ten years East Asia was able to maintain its flexibility during the Global Financial Crisis. The aim/purpose of this assignment is to show how the Asian economies have performed during and after the Global Financial Crisis, in relation to the structural transformation, in the role of the state/government, businesses, labour relations and regional...
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...Monetary Policy on Economic Growth and Inflation in Sri Lanka C.Amarasekara 1 Abstract Based on a vector autoregressive (VAR) framework and utilising both recursive and structural specifications, this study analyses the effects of interest rate, money growth and the movements in nominal exchange rate on real GDP growth and inflation in Sri Lanka for the period from 1978 to 2005. The results of the recursive VARs are broadly in line with the established empirical findings, especially when the interest rate is considered the monetary policy variable. Following a positive innovation in interest rate, GDP growth and inflation decrease while the exchange rate appreciates. When money growth and exchange rate are used as policy indicators, the impact on GDP growth contrasts with established findings. However, as expected, an exchange rate appreciation has an immediate impact on the reduction of inflation. Interest rate innovations are persistent, supporting the view that the monetary authority adjusts interest rates gradually, while innovations in money growth and exchange rate appreciation are not persistent. Several puzzling results emerge from the study: for most sub-samples, inflation does not decline following a contractionary policy shock; innovations to money growth raises the interest rate; when inflation does respond, it reacts to monetary innovations faster than GDP growth does; and exchange rate appreciations almost always lead to an increase in GDP growth. The results from...
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...microeconomics, which relates to the study of a single decision and ways it affects other economic variables, macroeconomics strives to understand aggregate economy and ways it is affected by changes in employment, local production, and inflation. Further, the government through the central bank and other bodies uses analytical models to understand changes in aggregate economic determinants such as economic growth or rate of employment thereby formulating policies that strive to accelerate economic growth. Understandably, one of the economic variables that help establish aggregate changes in the economy is changes in rate of unemployment. Unemployment refers to a number of persons ready and willing to work in particular type of a job at current market for pay but cannot secure one. In essence, unemployment as an economic indicator measures the health of the economy (Mercatus.org, 2016). For instance, high rates of unemployment indicate poor performing economy, while a decline in the rate of unemployment indicates a healthy economy or economic growth. Therefore, a measure of the rate of unemployment is an aggregate used to determine economic performance and changes that affect the overall performance of the economy. Therefore, this essay strives to elucidate aggregate economy and factors affecting it, for instance, ways changes in aggregate rate of unemployment affect the overall economic performance. Rate of Unemployment Rate of unemployment refers to the ratio of the number...
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...THE FUTURE OF ECONOMIC CONVERGENCE* Dani Rodrik Harvard University August 2011 * This is a paper prepared for the 2011 Jackson Hole Symposium of the Federal Reserve Bank of Kansas City, August 25-27, 2011. I am grateful to Arvind Subramanian for helpful conversations and to UNIDO for making their INDSTAT4 data base available. I also thank Cynthia Balloch for research assistance and the Weatherhead Center for International Affairs at Harvard for financial assistance. I. Introduction Novelists have a better track record than economists at foretelling the future. Consider then Gary Shteyngart‘s timely comic novel ―Super Sad True Love Story‖ (Random House, 2010), which provides a rather graphic vision of what lies in store for the world economy. The novel takes place in the near future and is set against the backdrop of a United States that lies in economic and political ruin. The country‘s bankrupt economy is ruled with a firm hand by the IMF from its new Parthenon-shaped headquarters in Singapore. China and sovereign wealth funds have parceled America‘s most desirable real estate among themselves. Poor people are designated as LNWI (―low net worth individuals‖) and are being pushed into ghettoes. Even skilled Americans are desperate to acquire residency status in foreign lands. (A degree in econometrics helps a lot, as it turns out). Ivy League colleges have adopted the names of their Asian partners and yuan-backed dollars are the only safe currency. This is sheer fantasy...
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...Unemployment is a barometer for economic well-being in other sectors of the economy. Unemployment is calculated through the unemployment rate. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. Labor force is calculated as Number of Employed + Number of Unemployed (seeking work). During periods of recession, an economy usually experiences a relatively high unemployment rate. There 3 main types of unemployment. The easiest type of unemployment to explain is known as frictional unemployment. Frictional unemployment is unemployment that occurs because it takes workers some time to move from one job to another. It is frictional because the labor market does not automatically match up all available jobs with all available workers. Instead, job search requires time for the right worker to find the right job. Both workers and society benefit when job applicants are matched to the appropriate job. Sources of frictional unemployment include the following: people entering the workforce from school; imperfect information (information about the availability of jobs); people re-entering the workforce after raising children; people changing unemployers due to quitting or being fired (for reasons beyond structural ones); people changing careers due to changing interests; people moving to a new city (for non-structural reasons) and being unemployed...
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...Structural Change in the U.S. Banking Industry: The Role of Information Technology Sandra D. Cooke Economics and Statistics Administration Office of Policy Development Office of Business and Industrial Analysis June 1997 ESA/OPA 97-6 Structural Change in Banking: the Role of Information Technology Structural Change in Banking: the Role of Information Technology ABSTRACT Commercial bank investment in information technology (IT) equipment has grown rapidly, from $104 million in 1960 to more than $10 billion in 1994. These investments in “hard” technologies (computer hardware, software, telecommunications equipment, etc.) have been accompanied by increases in "soft" technologies, for example, complex financial innovations that were infeasible on a large scale without IT hardware. These developments, together with deregulation, are creating new competitors, new financial markets and instruments, and a new role for commercial banks as providers of financial services. This study documents how changes in information technology have affected the role of banks in financial markets and have influenced changes in the structure and performance of the U.S. banking industry. The analysis also covers new, fast-growing financial innovations linked to IT investment e.g., asset securitization and derivatives. IT’s effect on the banking industry has been positive. Increased competition has caused banks to lose traditional customers, but IT enabled the banks to offer new products...
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...Protection in Australia page 6 3.5 The Australian Dollar page 6 3.6 SWOT (Strength, Weakness, Opportunities Cost and Threat) Analysis page7 3.7 CBA for Structural Reform page 8 4. Conclusion page 9 5. Recommendation page 9+10 6. Reference page 11 1. Executive Summary The purpose of this report was to analysis present of Australia’s trade position and prepared a plan for improving Australia’s position. Specific objectives were to identify key economic problems in term of trade and current account. Problems and solutions were found in the trade and current account though Carbon tax with high Australian dollar is likely to force radical structural reform on the economy and the manufacturing. The report recommends using structural reform to improve Australia’s trade position. Furthermore, Carbon tax initially acts against competitive international trade. In the long term, it can offer solutions to the two sector economy. 2. Introduction Since the onset of the East Asian economic and financial crisis in late 1997 the Australian economy has continued to record strong growth, despite many of Australia’s Asian major trading partners (MTPs) experiencing recession and a consequent slowdown in world economic growth. Therefore, this report will prepare a plan for improving Australia’s trade position and will focus on four areas: • Recommendations to improve Australia’s trade position ...
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...manufacturing economy in the world as well as the largest exporter of goods in the world. China is also the world's fastest growing consumer market and second largest importer of goods. China is a net importer of services products hence obtained an average annual Growth Domestic Product (GDP) growth of 9.10%. China has been an economic power house since the 70s, and ranked the 2nd largest economy in the world ever since. Presently, the Central Bank of China has adopted a Long Term Economic Policy, designed to reduce rural-urban income inequality, reduce centralized planning and to attract Foreign Direct Investments (FDIs) to boost their economy growth. China has also adopted several trade policies to liberalize their economy to encourage global trade. This will not only benefit the country, but the rest of the world consequently. This essay will attempt to analyze the performance trend of China’s economy with the consideration of the Production output performance analysis, Labour market analysis and Price level analysis. GDP growth rate Fig 1a) China’s annual GDP growth rate from 2004 – 2014 (Tradingeconomics.com, 2014). As shown in Fig 1a), China is seen to have a positive economic growth from 2004-2014 and a spike in it’s growth rate in 2007 before the global financial crisis in 2008. China then took a steep fall in 2008-2009 to 6.3% GDP per annual. The reason behind the plummet is due to capital flight of American Multinational Co-operations from the Chinese Economy due to the...
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...Topic #7 : Structural Adjustment ------------------------------------------------- Engy Naguib ------------------------------------------------- ‘Despite having their roots in a mixture of internal and external factors, the most appropriate response to current problems of economic performance in countries of the Middle East is to pursue stabilization and structural adjustment policies, supported by IMF/World Bank lending packages.’ Critically appraise this statement with reference to the recent experience of one MENA country of your choice. Many MENA countries have been facing significant economic hardships. This has forced the international community for economic intervention - serious interventions - to protect their interests in the form of economic reforms. Economic Reform and Structural Adjustment Programs had its failures, reflecting the failures of the post- Washington Consensus neo-liberal interventions in developing countries (Mitchelle, 1999). These failures have to reflect on choices of MENA countries as they are facing a cross-road. Forms of intervention varied in many ways after WWI, when political imperialism was done with its role in fostering mercantilist and conventional capitalism gains (Dillard, 1988). But these powers had to be maintained, so the economic intervention was more appealing than political, during the second half of the twentieth century. This paper argues that developing countries were victims of political and economic powers struggle...
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