...Association of Southeast Asian Nations (ASEAN) of Indonesia, Malaysia, the Philippines, Singapore and Thailand. We analyze impact real interest rate to nation saving for ASEAN starting 1991-2013. Through an analysis from Excel, real interest rate is found to have significant impact on national saving during different stage of economic. Extensions using a graph reveal the impact of real interest rate in ASEAN-5 and thus mainly reflect heightened concerns to national savings amid the Asian financial crisis and the global financial crisis. Keywords: real interest rate, national saving, financial crisis 1.0 Introduction The world’s average saving rate has been declining since the first oil shock and through the early 1990s. However this trend conceals a large and increasing dispersion of saving rates, particularly among developing countries. The large heterogeneity in saving behavior is associated to country and time differences in levels of development, growth performance, and fiscal and financial policies. The level of real interest rates has once again become the focus of policy makers' concerned. To understanding the response of national saving to changes in interest rates is central to many issues in economic policy. For example, a reduction in the budget deficit would probably cause interest rates to decline. If personal saving declined as a result, the overall increase in national saving would be less than the reduction in the budget deficit. Alternatively, monetary...
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...Inflation and unemployment were not improved by monetary policy Abstract The global financial crisis made a long term negative effect on the economy all over the world as well as New Zealand. GDP and inflation decreased with a high level of unemployment rate. This essay is going to discuss the effect of the actions from reserve bank. According to their response, the IS-LM, AD-AS and Phillips models will be used to analyze the effect of change in OCR on economic activities. Furthermore, some previous literature will be used in this essay which is relative to some problem happened during the recession. Introduction There is a big impact on the economic environment following the 2008 financial crisis. New Zealand faced a negative effect on unemployment rate, income, inflation and output and etc. as an important part of developed country. The main aim of this essay is to investigate what monetary policy has been used in response to the recession and whether it is useful to make a significant recovery. The financial crisis can be seen as a very serious problem in New Zealand. The stock market got hit seriously because the investment, income, confidence, employment rate etc. all fall. During the recession, the unemployment rate rose from a low of 3.5% in December of 2008 to a high level of 7.3% in June of 2012. (TRADING ECONOMICS, 2013) The New Zealand GDP had a negative growth during 2008 and 2010 because many businesses shut down and the unemployment rate increased...
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...article is a reflection on monetary policy in the United States during Ben Bernanke’s two terms as Chairman of the Federal Open Market Committee, from 2006 to 2014. Inflation targeting, policy during the financial crisis, and post-crisis monetary policy (forward guidance and quantitative easing) are discussed and evaluated. (JEL E52, N12) Federal Reserve Bank of St. Louis Review, Second Quarter 2014, 96(2), pp. 111-21. en Bernanke chaired his last Federal Open Market Committee (FOMC) meeting in January 2014 and departed from the Board of Governors on February 3 after eight years as the head of the Federal Reserve System. So, the time is right to look back on the Bernanke era and ask how central banking has and has not changed since 2006. There is plenty in the macroeconomic record from 2006 to 2014 to keep economists and policy analysts busy for many years, so in this short piece we can only scratch the surface of what is interesting about the Bernanke era. I will focus on three issues: (i) inflation targeting, (ii) Fed lending and other interventions during the financial crisis, and (iii) post-crisis Fed policy, in particular experiments with forward guidance and quantitative easing (QE). B INFLATION TARGETING When Bernanke began his first term in 2006, I think the big change people expected was an inflation-targeting regime for U.S. monetary policy, similar to what exists in New Zealand, Canada, and the United Kingdom, for example. While that may have been in the cards...
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...were the cause of the financial crisis of 2008 and 2009” The 2008 financial crisis led to a sharp increase in mortgage foreclosures primarily subprime leading to a collapse in several mortgage lenders. Recurrent foreclosures and the harms of subprime mortgages were caused by loose lending practices, housing bubble, low interest rates and extreme risk taking. Additionally, expert analysis on the 2008 financial crisis asserts that the cause was also due to erroneous monetary policy moves and poor housing policies. The federal government encouraged the expansion of risky mortgages to under-qualified borrowers. Congress pushed for the support of affordable housing through extended procurement of non-prime loans for applicants with low income (Zandi, 2008). The cutting down of interest rates to low levels to supplement for technology bubble of early twentieth century and the effects of Sept 11, a housing bubble was created. This move facilitated individuals with poor credit to obtain mortgages in high percentage when lenders created non-conventional mortgages by offering mortgages with extensive amortization periods, loans with interest and payment alternatives such as ARMs. Ultimately, interest rates rose again and many subprime borrowers stopped paying for their mortgages when their interest rate were reset to higher monthly payments. Subprime mortgage is simply defined as loan offered to someone with a weak credit history. Since the 2008 financial crisis had its source in the...
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... |Hena Damodaran - EEPSM -04- 015 | | |Jupudi Venkata Narasimha Rao –EEPSM-04-018 | | |Jaspreet Kaur Rekhi – EEPSM-04-016 | Objective: The objective of this project is to examine, find out the relationship between market structure and performance in the banking (NIC Code 6491) and real estate (RE) (NIC Code 6810) sectors using data from the Commercial Banks and RE firms operating in India before the world financial crisis (started in 2008), during the financial crisis, recovery period and beyond. The project would be beneficial for stakeholders /...
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...predict that exchange rates are determined by economic fundamentals, and one of this is the interest rate differential between home and abroad. According to Mundell-Fleming model, an increase in interest rate is necessary to stabilize the exchange rate depreciation and to control the inflationary pressure and also helps to avoid many adverse economic consequences. The following are the effects of the domestic interest rates. First, higher domestic interest rates raises the demand for deposits, and the money base. Second, firms need bank loans to finance the wage bill, which reduces output when domestic interest rates increases. Lastly, higher interest rates raise the government’s fiscal burden, and, therefore, can lead to a higher expected inflation. While the first effect tends to appreciate the currency, and the remaining two effects also tends to depreciate the currency. In particular, the exchange rate response depends upon on the size of the interest rate increase and on the initial level of the interest rate. In other words, the decline in the value of the exchange rate can motivate the monetary authorities...
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...Geography, culture and politics, these are just some of the things that define a country. However, deviating from their native definitions, these words have so much more to imply. Geography does not merely speak of the structure or the location of a sovereign. It is denotative of an innate wealth – the kind of resources that makeup a country. Is it fisheries and agriculture or oil? On the same note, culture does not only tackle arts, norms and religion. Neither does it plainly label a people. It influences a more common perspective including a people’s behavior and tastes. Having considered their behavior – how they think – and their tastes – what they prefer, these serve as the bases of what they need, want and desire. Consequentially, these needs, wants and desires create consumption. As consumption takes center-stage, it manufactures demand which triggers production. Lastly, politics is not solely bound to power and/or its allocation. Politics entails a government that is more than just a system of representatives chosen by a people. It brings forth important roles and functions of the government: stability of prices, employment and steady growth. All these things concern one thing – the economy. An economy refers to how wealth and resources within a region or country is allocated vis-a-vis production and consumption. It can also be regarded as a measure of how well a country has performed given a particular timeframe. An economy gives rise to the identity of a specific...
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...camera, and other related fields to satisfy customers’ needs. Nowadays, JB HI-FI is not only the retail chain store only for the specialized visual goods, but also cooperate with many brands and manufactories to lower the cost and becomes the leading place in discounted electronic retail brand. 1 GDP in Australia/GDP growth rate GDP is regarded as the most significant indicator to evaluate the economic situation of a country. From the 1980s to 2000’s the economic of Australia, GDP keep steadily increased, JB HI-FI was expand its business. The global financial crisis started in 2007 and reached the dramatic drop point in 2009. During that hard time, JB HI-FI was also experienced the challenging time ever. However, the financial crisis gave JB HI-FI a chance to diversify to the new market. Such gaming product increasingly had a higher demand. 2 Interest rate From 2000’st, the interest rate was at a high level until the financial crisis which affected Australia. From 2011, interest rate dropped gradually and reached the historical bottom point at 2.5% now. Thus, it is more likely to boost household’s consumption and reduce their aggregated savings in the bank. Leading to larger amount of consumer consumption and spending on...
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...case give an example relating to the financial markets to illustrate your answer. • asymmetric information • moral hazard • quantitative easing (QE) Asymmetric information In the financial market, asymmetric information is a situation in which economic agents involved in a transaction have different information. It happens in the transaction when the buyer has more information than the seller, or contrary, as when a private motorcycle seller has more detailed...
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...How this country was affected by the current global crisis? How is it dealing with the situation? Be sure to address the monetary and fiscal policy of the government and the rescue package (if any) implemented by the government. This paper describes how government of India and RBI (Reserve bank of India, equivalent to Fed Reserve in US) tackled aftermath of global financial crisis in India. Effects of Global crisis Aftermath of Financial crisis was more prominent during 2008. As the global financial crisis began unfolding in the first nine months of 2008, foreign institutional investors pulled out close to $10 billion from India, dragging the capital market down with it. The liquidity crisis, coupled with the credit squeeze and a weak currency, hurt various sectors. Banks have reined in retail financing, affecting home and auto loans. Car loans account for 70% of consumer auto purchases now, down from 85% a year ago. Meanwhile, consumers are deferring other purchases while financiers have been logging a drop in loan disbursal rates At that time the Bombay Stock Exchange Index, or Sensex, tumbled 6% to a two-year low. For the first time in five years, the central bank cut the cash reserve ratio, the amount of funds that banks have to keep with the Reserve Bank of India by 50 basis points, to 8.5%, on Oct. 6, 2008. The same evening, the Securities & Exchange Commission of India eased some restrictions on foreign portfolio investors—such as registering in India before...
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...Introduction Currently the United States is in the midst of the worst global financial crisis of the 2l century, which traced its origins to the sub-prime mortgage disaster that began to unravel in 2007. The shocks of global crisis are devastating: homeowners filed for bankruptcies and faced foreclosures in record high numbers, leading Wall Street firms such as Bear Sterns and Merrill Lynch crumbled under their massive exposure to sub-prime mortgage holdings that turned into toxic had assets and over $50 trillion in wealth had been wiped out within the last two years. No financial crisis since the Great Depression prompted many policy reactions as governments scrambled to map out rescue plans to restore stability and revive economic growth. The after effects of the sub-prime mortgage meltdown have left policymakers both in the United States and around the world struggling to restore growth and confidence in their economies. What are the causes behind the U.S. sub-prime mortgage crisis? Is one cause more responsible than another? Why of why not? The principal cause of the economic slowdown was the collapse of the global credit boom and the ensuing financial crisis, which has affected asset values, credit conditions, and consumer and business confidence around the world. The immediate trigger of the crisis was the end of housing booms in the United States and other countries and the associated problems in mortgage markets, notably the collapse of the U.S. sub-prime mortgage...
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...standards in Malaysia. 3 -7 Unemployment in Malaysia 7 - 10 Inflation in Malaysia 10 - 12 Summary 13 References 13 -14 1. Introduction Macroeconomics can be best understood in contrast to microeconomics which considers the decisions made at the level of a specific subgroups or individuals. Macroeconomics considers the behavior of an economy at the aggregate level or how all of these decisions sum together. It looks at the bigger picture and involves the study of the economy as a whole. More specifically, it is a study of national economies and the determination of national income. The study of macroeconomics are focusing on several factors that are: * Real output – determine the reason of the economic growth and their differences between various countries. * Productivity – the average labour productivity. * Economic growth – causes of decline and growth. * Unemployment – types, reason and how to overcome it. * Inflation – Causes, reason of different rate either from time to time and from one country to another. In order to greasing the engine of the economy, government used several policies such as: * Financial or monetary policies to influences supply of money in their economy. * Fiscal policy such as taxes and government expenditure...
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...for Economics 100, taught by Professor Olanrewaju. MACROECONOMIC FACTORS AND THE ECONOMY 2 Abstract This paper discusses about how a monetary policy causes specific macroeconomic factors such as GDP, interest rates, inflation, and unemployment. It contains how monetary policies differ in managing an economy. It includes the proposed circumstances why or what would have happened if the monopoly was successful. MICROECONOMIC FACTORS AND THE ECONOMY 3 Introduction What happens around the globe affects us and our families in ways that are uncontrollable in previous years. Today, we faced with many layoffs and cut back production and flooded with business-and economics-related articles about massive layoffs and limited resources by which we all live by. It just a matter of time when the economic crisis became a political and social crisis. When people became unemployed, President Obama signed off a proposal in extending their benefits where they can meet their financial obligations. Over half of the unemployed are currently going to colleges and universities since the job markets have grown larger. The reason is because the businesses...
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...School of Management Blekinge Institute of Technology How macro environmental forces affect business buying behavior after a recession: A case study of the second hand truck business NAME OF AUTHOR Christos Kakazoukis NAME OF SUPERVISOR Urban Ljungquist MASTER’S THESIS IN BUSINESS ADMINISTRATION, MBA PROGRAM Jan 2011 Thesis for the Master’s degree in Business Administration Autumn 2010 Abstract Master thesis in business administration, MBA Program, School of Management, Blekinge Institute of Technology, fall of 2010. Author: Christos Kakazoukis Supervisor: Urban Ljungquist Title: How macro environmental forces affect business buying behavior after a recession: A case study of the second hand truck business. Keywords: Buying behavior, customer behavior, financial crisis, trucks, PESTEL Background and problem: The financial crisis has had a deep impact on businesses all around the world. This has affected our purchases, both as retailers and as customers. In this thesis I will investigate how the buying behavior has changed, before, during and after the financial crisis with focus on the second hand truck business. I will also investigate which macro environmental factors have affected the buying behavior. Purpose: The purpose of this research is to describe changes in buying behaviors from influence of macro environmental forces. Method: I have used a qualitative method, and as a part of that face to face interviews, to understand and establish a better contact...
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... Criticisms on the controversial roles of IMF in East Asia Financial Crisis Introduction Now and then, nation to nation, financial crises are inevitable: Mexico in 1994, the whole East Asia region in 1997, Brazil in 1999, and the most recently Argentina in 2001. Looking back to the victims of such financial crises, we found that most of them are labeled as the developing countries, whose financial sectors were still weak at that time yet were impetuously exposed to the advocated ‘Liberal financial market’ which was supported by the Neoclassical Liberalism social economists. Among all these financial crises, the financial storm in East Asia, starting from the year of 1997, wreaked beyond doubt the greatest havoc on the Asia and the world economy as a whole, dragging down the ‘Asian tigers’ (Thailand, Malaysia, Indonesia, Philippine, Hong Kong, Korea, Taiwan and Singapore) from the peak of the glorious ‘Economic Miracle’ in the past few years. Because of the severity and contagion of the East Asia Crisis, important questions have been raised such as the causes of the crisis, the role of the International Monetary Fund (IMF), and the financial architecture of international capital markets. As one of the most important international organizations, IMF has its great impact on the world economy. In this paper, the influence of IMF before the eruption of the crisis and its role in the recovery of East Asia economy will be presented...
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