...|2011-11-10 | Executive Summary This report first analyzes the economy of Chile in terms of strengths, which are the abundance in natural resources, and the weakness of heavy reliance on copper. Then identified two severe threats the nation was facing in 1998: Asian financial crisis and current account deficit. The two threats interact with the characteristics of Chilean economy which lead to the risks of currency crisis and a economic slowdown. The second section then investigates Chile’s current policies on inflation, trade and exchange rate. In terms of inflation, the central bank uses tight monetary policy and controls on capital inflows such as Unremunerated Reserve Requirement. For trade, the country relies on entering free trade agreements. For foreign exchange policy, Chile maintains a crawling peg system but is increasing the trading band. Facing the current challenges, we recommend that Chile should focus first on solving the potential currency crisis, then the economic slowdown. To avoid a currency crisis, the central bank of Chile should continue the tight monetary policy by raising interest rate. This practice can stabilizes the domestic currency value, attracts international capital and increases domestic savings. Focus directly at reducing current account deficit, Chile should also...
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...The Russian Ruble Crisis of 1998 is termed as among the worst financial crisis to hit the Russian economy. The Crisis is believed to have been triggered by a number of factors. The Asian financial crisis of 1997 is a major cause of the crisis as it led to declines in the world commodity prices (Owyang, & Chiodo 2002, p. 7). Just to be appreciated is the fact that Russian economy was heavily dependent on oil. There are other reasons such as the downfall of the Soviet Union in 1991 and the economic difficulties it brought to the Russian nation. Another common cited reason is poor financial policy practices by the Russian government as well as political crisis that were witnessed in the nation earlier that year (Owyang, & Chiodo 2002, p. 7). The Russian financial crisis had various political and economic consequences. First, the crisis compromised the confidence of the citizens of Russian to the government of president Yeltsin. Indeed, facing much opposition in the parliament, Yeltsin was forced to fire Kiriyenko as the prime minister and nominated Foreign Minister Yevgeny Primakov to the position (Tarassova, Kraakman, & Black 2000, p. 12). On the economic front, the Russian crisis led to the collapsing of the Russian stock, bond, and currency market on august 13, 1998. This was a direct result of investors fear that the government could devalue the ruble as well as claims of failure by the government to repay its domestic debts. This paper gives a critical analysis...
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...Department of Economic Development Challenges The Department of Economic Development in Dubai organizes, regulates, and boost trade within the industry of Dubai, UAE. This Department registers business and gives licenses and commercial protection (“Dubai business”, 2012). Due to such a significant Department and the role it plays within the city of Dubai, it faces some challenges. A survey was completed based on prospects for the year 2012, and according to that survey, the Department of Economic Development faced some challenges throughout the year (Sambige, 2012). The Business Confidence Index that was under the Department of Economic Development was not as successful as it was in its previous years. The reason for this fallout was due to the summer holidays and the time of Ramadan during the past summer (Sambige, 2012). The Dubai faces the challenge, of trying to increase productivity as a result of the scarcity of capital as well as the increased cost, given the global environment (Rowe, 2012). The economic crisis that hit Dubai, deeply affected the DED. The construction and the real estate sectors in the city minimized vastly by 14.7% and 2.6% in 2010, compared to 19.5% and 19.8% in 2009 (Rowe, 2012). Another challenge that the DED is facing this year is the economic slowdown that is occurring in other countries such as Europe, China, India, as well as other GCC countries. There have been issues such as economic crisis in other parts of the world as well as the rise...
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...unfavorable supply shocks, or according to the theory adverse supply shocks. When these kinds of problem arise in the world oil market, it is usually described as a world oil crisis. The world has witnessed 2 major oil crises and it is facing another one at the moment. In order to discuss the recent oil crisis and its economic implications I am going to refer to the appropriated economic theory and I will also exam! ine the two previous oil shocks in the world. As I mentioned previously the major problem that an economy is facing during every oil crisis is the adverse supply shock. Adverse supply shocks are unexpected events that reduce aggregate supply and therefore the output decreases and prices increase. In the language of economy we call this stagflation . Furthermore, I will refer to the organization that has caused the three supply shocks so far. OPEC, the Organization of Petroleum Exporting Countries, has the power to control the world oil prices by its reduction in the world oil supply. That’s what has done in the oil crisis that had happened in the early 70’s(Mankiw 252). OPEC’s reduction in the supply of oil had doubled the world oil price instantly. As I said previously this had caused stagflation in every oil importing country. In addition I will refer to the US statistic about the oil crisis...
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...Abneil D. Alicea The Commonwealth of Puerto Rico, a Caribbean island and unincorporated U.S. territory, holds more than $73 billion in debt. According to United States Census Bureau and World Bank, the Island has only 3.337 million dwellers (2017). So, how an Island with this population is responsible for a debt of such large amount? There are several answers to this question and from different perspectives, but everyone can agree that Puerto Rico is facing a major economic crisis. I will be presenting the causes of this historic bankruptcy eyeing the economist's view, and the viewpoint of different civil society groups. Anne Krueger, an American Economist and first deputy managing director of the International Monetary Fund (IMF), together...
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...How did Europe Economic Crisis begin? After went through our research and discussion, we knew that many of the Western world borrowed too much due to low interest rates and cheap credit in the 2000s. According to the US, this issue caused a property bubble which burst in between 2007 and 2008, causing a financial crash as banks worldwide including Europe had to write off lots of assets so had much less money than they thought. This had two effects, it caused interest rates to rise a lot, so that banker couldn’t lend out money and governments took on lots of debt bailing out banks. Some countries in Eurozone such as Ireland, Spain, Portugal, Italy and Greece all had very high national debts, either from overspending pre-crash, or bailing out their collapsing banks. High debts plus recession which is decreasing government tax revenue plus high interest rates equals threat of bankruptcy. So, all the above issues are specific to Europe, and we are discussing about the Eurozone economic crisis. Basically, all countries adjust their economies with monetary policy. With a unified currency, less productive countries e.g. southern Europe couldn't do this, so became less competitive and borrowed. They also able to borrow at cheap interest rates because of the currency union. This was part of why debts got so high in the southern of Europe. At the same time, Eurozone not only facing all those problem but also another problem. Normally a country almost no default because it can just print...
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...EUROPEAN DEBT CRISIS – ORIGIN, CONSEQUENCES AND POTENTIAL SOLUTIONS F RA N TI Š E K N E M E T H Abstract What is the European debt crisis? As the head of the Bank of England referred to it in October 2011, it is “the most serious financial crisis at least since the 1930s, if not ever.”1 In fact, the European debt crisis is the shorthand term for the region’s struggle to pay the debts it has built up in recent decades. Five of the region’s countries – Greece, Portugal, Ireland, Italy, and Spain – have, to varying degrees, failed to generate enough economic growth to make their ability to pay back bondholders the guarantee it’s intended to be. Although these five were seen as being the countries in immediate danger of a possible default, the crisis has far-reaching consequences that extend beyond their borders to the world as a whole. Introduction The global economy has experienced slow growth since the U.S. financial crisis of 2008-2009, which has exposed the unsustainable fiscal policies of countries in Europe and around the globe. Greece, which spent heartily for years and failed to undertake fiscal reforms, was one of the first to feel the pinch of weaker growth. When growth slows, so do tax revenues – making high budget deficits unsustainable. Greece's economy has struggled since the country joined the euro in 2001. In 2004, it admitted its budget deficit was higher than allowed under rules of entry. By 2008 the government had narrowly passed a belt-tightening budget...
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...social trust has had a crisis. To solve this problem, the basic way is to use a more fair system arrangement and social guarantee to reduce and eliminate the behavior of its own security and interest security. Social trust and social credit as an important social capital and social resources focus on it for the role of social intercourse activities. Realistic experience shows people that mutual trust plays a significant role in the communication of social exchange activities. The society is a community of people and its existence need certain trust. This can be investigated from two dimensions; the first one is the transverse dimension of the plane dimension. Society is made up by numbers of people, if the society is lack of trust of the confidence is too low, it will be very difficult to communicate among people. Generally, there is a certain amount of trust existing in any society; the difference is the extent of the trust and level. The second one is the vertical of longitudinal dimension. Because of the social division of labor, there is a certain class or grade difference between different people. Society needs a specific management, and the right to manage requires a particular level of structure, which means a hierarchical social order arrangement is needed. Some economists believe that China has serious trust crisis, including the commercial credit crisis, the public good faith credibility crisis, interpersonal trust crisis and value crisis. What’s more, bureaucracy...
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...Abstract Greece is experiencing a budget crisis so severe that the country may lose its footing in the European Union. Athens is reporting a deficit that is four times the EU limit, which means that Greece could be in danger of losing the euro as its national currency. The government has promised tough austerity measures, but many Greeks say they are in no mood for sacrifice. Farmers are blocking border crossings, highways and major ports to demonstrate their frustration. They say they're desperate. Cheap imports and middlemen's charges are apparently pushing Greek produce out of major markets. Pavlos Issaris grows potatoes, wheat and corn. He says the cost of doing business is putting him out of business. He and other farmers want the government to provide subsidies to reduce the price of diesel and other necessities. And Issaris says he also wants the government to more aggressively control imports. Greece and its Economy Problem The new government of Socialist Prime Minister George Papandreou is resisting subsidies. Athens is trying to reassure its EU partners with a plan that includes tax hikes and sharp cutbacks in the country's enormous public sector. Nearly 1 in 10 Greeks is employed by the government as a civil servant; that's almost 1 million people. But Papandreou's pledge to trim that number has already triggered protests. Civil servants are planning nationwide strikes this month. People have a hard time believing that we're actually going to do what we...
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...developing to then impact other countries, such as the UK economy. The essay will discuss the implications on UK small and medium enterprises. One of the key issues which will be discussed as to the implication of the credit crunch, is the availability of finance to SMEs. More so other non direct aspects which have which act as implications will too be discussed. The credit crunch has been defined as a shortage of money or loans as well as other types of credit given by banks. In short the BBC defined the credit crunch as “a severe shortage of money or credit” BBC: Timeline: Credit crunch to downturn (2009) It describes the economic condition of an economy. In most situations, when an economy has been in a credit crunch, the economic condition of a country is unstable or also known as a financial crisis. As the Guardian states, “the current global financial crisis is commonly known as the credit crunch.” Kollewe (2008) Credit crunch’s can occur mostly when an economy is in a recession, a time when the economy is declining during which the there is fall in gross domestic product (GDP). More importantly, the term credit crunch emphasises the state the economy is currently in. Recently the UK has faced a credit crunch which started in 2007-2008. The credit crunch of 2007 developed due to certain reasons. But firstly according Khandker (2011) it developed over time due to a number of events in the past. The first was due to the 1997 subside of currencies in East Asia, which...
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...been suffering from global economic recession and financial crisis. From US subprime to EU sovereign debt crisis, China, as the second largest economy in the world, experienced internal and external economic impacts. In the year of 2007, China’s economic development reached its pick. With the expectation of CNY appreciation, hot money flooded into China. As a result of this, the price of investment asset surged up sharply. The housing price tripled, and the Shanghai stock index reached to a historical level of 6300 from less than 3000 with in one year. The wealth effect from the high investment asset price stimulated consumption. Moreover, China was keeping its high net exports trading volume and fixed asset investment. The GDP growth rate exceeded 10%. However, the financial bubble broke in the US, and a chain reaction directly affected China. In 2008, all economic indictors shown that China’s development slowed down. Stock market can be regarded as the forecaster of economic. The Shanghai stock index dropped to 1900 from 6300. Affected by recession in international trading partners, the export also decreased sharply. Facing these problems, Chinese government proposed a basket of economic stimulation plans. The most influential one is the CNY 4000 billion infrastructure investment plan. Due to the stimulation, China’s GDP kept its 8% growth. The global financial crisis is far from end. In 2011, EU sovereign debt crisis made the world economic...
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...Impact of Global financial crisis On Pakistan By: Nauman Ayubi Butt Roll # 8511 Table of contents 1) Reason of choosing this topic 2) Introduction 3) The term ‘Financial Crises’ 4) Financial Crisis 2007-2009 5) Causes of the crisis 6) The crisis getting global 7) The Financial crisis and Pakistan: 8) Sectoral impact of the crisis in Pakistan: 9) External sector impact i) Exports ii) Imports 10) Financial Sector impact on i) Foreign exchange ii) Banking sector iii) Circular debt iv) Stock market: 11) Inflation 12) Economic business sector impact i) Impact on textile industry 13) Social Sector Impacts 14) Poverty and unemployment: 15) IMF 16) Technique to tackle the situation Reason for choosing this topic: The reason for choosing this topic is that it has a direct relationship with the poverty, unemployment, literacy, wealth distribution and also with the increased level of terrorism in Pakistan. Introduction: Capitalism is an economic system in which land labor production pricing and distribution are all determined by the market. There is a strong history of capitalism that it can shift from extended period of rapid growth to very short periods of contraction The global financial crisis in 2008-09 which are still on the go, they actually started from the 20th century and they have been increasing since then. In the end of 20th century the U.S housing prices after a multiyear started declining, the mortgage prices had been at...
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...TOPIC: Bank Role in economic Crises Topic that we are going to choose is Bank role in economic crises. First, we will explain what does it means by risk management in banking. After that, we will have a clear introduction of our topic- Bank role in economic crises. The question that we would like to answer in this paper is what role that bank is going to play when the economic are facing crises or downturn. Thus, we will list down the responsibility that bank should take in before economic crises and how they manage to overcome the risk. They are many difference ways that bank can react to economic downturn. The interesting part of this topic are that we can learn to know how difference bank response to economic crises (e.g. the way that bank use to overcome the risk that face during economic crises). Moreover, we will learn what does it means by risk management and how can it help in the roles of bank in economic crises. To address our topic, we will first read through the text book- Koch, Timothy W, Management of Banking, 6th ed. (2006), Thomson South-Western that sir teaches on the lecture. After have a clear understanding of what is means by risk management of banking, we will start to search the information for our topic. Besides, we will take the sources that related to economic crises from news paper to make it as our example in answering this topic. We will also search online for more abroad information. 1. Introduction of bank management 2. Introduction...
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...The concept of globalization is simply to harmonize all nations by interchanging knowledge of societies, markets, transportations, technology, and various cultural aspects, in hope to create global stability and homogeneity of regulations for a standardized world. The subject of focus in this writing is attentive to economic globalization and the International Monetary Fund (IMF). The IMF was first introduced, along with the World Bank, (these two collectively known as the international financial institutions) towards the end of World War II, in 1944, as an attempt to defend the world from facing another financial crisis such that of the Great Depression (1930) and revive the damages caused by the war. The six goals and guideline principles...
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...to member countries which are either developing countries that are in extreme poverty or countries that are faced with severe economic crisis who are no longer able to seek financing from other sources. Along with these loans, training and technical assistance on bettering economic management is offered. The IMF also provides policy advice to governments and central banks based on analysis of economic trends and cross-country experiences as well as research, statistics, forecasts, and analysis based on tracking of global, regional, and individual economies and markets. (About the IMF, n.d.) Currently there are 188 member countries of the IMF which makes the organization extremely important to virtually the whole world. Upon its creation at the Bretton Woods Conference there were 29 member countries who signed the Articles of Agreement in 1945. Between its creation and present day the IMF has helped countries deal with economic crises, and funded growth for many poverty stricken countries. As the IMF has grown into a major global economic body the role of the IMF has shifted from its first purpose of ensuring currency exchange rate stabilization and overseeing of the international monetary system to a major global lending organization and global economic stabilization force. (About IMF, n.d.) “Two years ago the world’s main international economic institution [the IMF] was heading for irrelevance, its homilies ignored by rich countries, its advice despised in poorer ones...
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