...Economic and Monetary Policy Auditing and Business Concepts Submitted by: Edmore H. Delaney Perspective of the Economic and Monetary Policy Framework of the Republic of Liberia This paper is intended to capture the framework of the economy and monetary policy of the Republic of Liberia and the effectiveness it pursues in the implementation its institutional framework. The economy continues to be plagued by a multiplicity of social, financial and economic challenges which has seen production level of the sector far below prewar levels (Findlay & O’Rourke, 2007). Consequently, the government’s approach has been directed towards vigorous pursuing money and credit supply to stabilize the economy. In order for Liberia to implement a sound economic and monetary policy, the government needs to ensure that a monetary aggregate is achievable. The Central Bank of Liberia in 2005, initiated a program to ensure stability of money demand functions where interest rate and income will significantly have impact on the money demand function (Matthew, 2009). The real gross domestic product (GDP) growth in 2014, which was initially projected at 5.8%, is estimated to decline to 2.5% or less by the end of the year. According to the Ministry of Finance and Economic Planning due to the absence of EVD, growth projections in 2014 reflected a weaker economic outturn as compared to the previous year (2013). This growth was driven largely by the expansion...
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...Economic and Monetary Policy Brenda Roper Dr. Jones Olajide Auditing and Business Concepts February 21, 2016 Economic and Monetary Policy: Sweden and the USA The monetary and economic policies of a country influence its economic growth through internal and external investment. Reforms in these policies have been the norm of many countries globally with the aim of attracting investors in the highly globalized international community (Alexander & Thomas, 2013). As transport and technology continues to increase opportunities to trade with multiple countries, it is becoming necessary for countries to attract as many external investors as possible to bring new advantages that can boost the economy. This paper will attempt to review the economic and monetary policies of the United States and Sweden. These countries were among the best ten economies in the world in 2013 and continue to strive to retain the top positions among the world economies. Question One Sweden has over the recent years emerged as the model economy in the world through its commitment to reforms that increase its efficiency in economic development. Although the country fell from the third position in 2011 to position six in 2013 in terms of competitiveness index (Scott, 2015), it has continued to retain its position in technological readiness. Compared to other nations in terms of incorporation of existing technologies in all forms of economic activities, Swedish companies are far ahead of others...
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...MONETARY POLICY WHAT IS MONETARY POLICY? Policy to control the supply of money in the country Targeting a rate of interest to attain objective of growth and stability of the economy. TYPES OF MONETARY POLICIES Expansionary • Increases the total supply of the money in the economy • Used to combat unemployment in a recession by lowering interest rates TYPES OF MONETARY POLICIES Contractionary • Decreases the total supply of the money in the economy • Used to combat inflation by raising interest rates TOOLS OF MONETARY POLICY IN INDIA Cash Reserve Ratio (CRR) Statutory Liquidity Ratio (SLR) Repo and Reverse Repo Rate CASH RESERVE RATIO (CRR) • Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank • RBI uses CRR either to drain excess liquidity or to release funds needed for the economy from time to time. STATUTORY LIQUIDITY RATIO (SLR) • SLR is the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. REPO AND REVERSE REPO RATE REPO RATE • It is the rate at which the RBI lends shot-term money to the banks. When the repo rate increases borrowing from RBI becomes more expensive. REVERSE REPO RATE • It is the rate at which banks park their short-term excess liquidity with the RBI. The RBI uses this tool when it feels there is too much money...
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...In a free market society where firms and households shape the economy, government intervention can significantly contribute to economic stability and improve current economic outcomes. The successful use of government policy tools is evident through an examination of environmental economics, monetary policy and the labour market. With regards to the environment and the labour market, the government have made use of taxes, permit trading systems, general regulations and transfer payments to influence economic outcomes in each of these respective fields. By studying monetary policy it is also apparent that control over the interest rate mechanism is another effective tool used by policymakers to enhance the present and future economic circumstances of a nation. As society continues to expand, the quality of the environment is beginning to deteriorate. Governments to prevent this from occurring and to avoid market inefficiency, can help the economy through policy tools such as enforcing taxes and regulating pollution permit trading systems. As shown in Figure 1 below, market equilibrium (Me) on its own is inefficient because it does not take into consideration the negative externalities that arise during production and does not account for a lack of incentive by firms to incorporate additional production costs. The implications of market failure will mean that a society will not be allocative efficient and as a result output will be greater than it what it should be (Q0 instead...
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... U.S. Economic Situation When it comes to explaining The Fiscal and Monetary Policy and Economic Fluctuations, there are many variables to take into account. Looking at how the United States has been on this long recovery since the recession starting in 2007 all the way up to this point, the economic situation has gone from bad to ok. In discussing the economic situation as opposed to 5 years ago, one could truly argue that even though the situation was not the best to say the least, the United States is looking better and better when it comes to the economy. In October 2009 the unemployment rate in America was 10 percent, or that was the peak of it. It had not been that bad in America since late 1982, early 1983. In July 2009 the number of job openings declined to a series low of 2.1 million, unemployment reached a recent low of 129 million in February 2010. By 2012 it had increased to over 132 million and seemed to be rising, little did anyone know that things would soon take a turn for the better. Economists were predicting outrageous numbers for the next few years before things would even begin to get better, and they too were wrong in that prediction. Business cycles differ from economic fluctuations. As much as some market observers would prefer, economic fluctuation is a fact of life. Economic fluctuations are generated by shifts in specific economic data that affect limited facets of the economic picture. (http://www.ehow.com/info_10032315_main-economic-variables-affect-business-cycle...
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...[pic] [pic] Assignment Course code: ECON 403 Course title: Monetary Theory and Policy Lecturer: Asst. Prof. Dr. Hasan Gungor Student: Murad Alakbarov Student number: 065028 Task for Assignment II: Compare and contrast 1929 – 39 Great Depression and current global economic crisis with respect to causes and responses and actions of monetary authorities to this crisis. Introduction “…In the old days, we used to suffer nearly periodic economic crises, the sudden onset of which was called a "panic", and the lingering trough period after the panic was called "depression". The most famous depression in modern times, of course, was the one that began in a typical financial panic in 1929 and lasted until the advent of World War II. After the disaster of 1929, economists and politicians resolved that this must never happen again. The easiest way of succeeding at this resolve was, simply to define "depressions" out of existence. From that point on, America was to suffer no further depressions. For when the next sharp depression came along, in 1937-38, the economists simply refused to use the dread name, and came up with a new, much softer-sounding word: "recession". From that point on, we have been through quite a few recessions, but not a single depression. But pretty soon the word "recession" also became too harsh for the delicate sensibilities of the American public. It now seems that we had our last recession in 1957-58. For since...
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...on inflation and unemployment and a steady rate of economic growth along with a current account stability. Fiscal policy involves the use of government spending and tax receipts to influence the level and pattern of economic activity, whilst monetary policy uses interest rates to achieve the same. Fiscal and monetary policy can be used to influence short term Aggregate Demand with the aim of promoting a steady rate of economic growth, low unemployment and low inflation. In a recession there will be a loosening of monetary policy when interest rates are cut and a budget deficit run with the aim of boosting Aggregate Demand throughout the economy. This is what is happening at the moment in the UK as the economy slowly comes of out recession. Interest rates are down to 0.5% and income tax rates are slowly being cut to act as an incentive to workers to work harder and boost productivity. However, as we see in the UK economy these policies are having a very slow impact on growth. Consumer confidence and business confidence is very low and when this happens cuts in interest rates and taxes will not encourage household and consumers to spend more. They may be tempted to use the extra money to save more and pay off debt rather than spend and this could hinder economic recovery. Inflation in the UK economy was very low between 1992 and 2008 and this allowed interest rates to fall to a low level which helped boost economic growth and living standards in the economy. Now with...
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...What Is the Quantity Theory of Money? By Reem HeakalAAA | The concept of the quantity theory of money (QTM) began in the 16th century. As gold and silver inflows from the Americas into Europe were being minted into coins, there was a resulting rise in inflation. This led economist Henry Thornton in 1802 to assume that more money equals more inflation and that an increase in money supply does not necessarily mean an increase in economic output. Here we look at the assumptions and calculations underlying the QTM, as well as its relationship to monetarism and ways the theory has been challenged. QTM in a Nutshell The quantity theory of money states that there is a direct relationship between the quantity of money in an economy and the level of prices of goods and services sold. According to QTM, if the amount of money in an economy doubles, price levels also double, causing inflation (the percentage rate at which the level of prices is rising in an economy). The consumer therefore pays twice as much for the same amount of the good or service. Another way to understand this theory is to recognize that money is like any other commodity: increases in its supply decrease marginal value (the buying capacity of one unit of currency). So an increase in money supply causes prices to rise (inflation) as they compensate for the decrease in money's marginal value. The Theory's Calculations In its simplest form, the theory is expressed as: MV = PT (the Fisher Equation) Each variable...
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...Effect of Monetary Changes on Relative Agricultural Prices TA Asfaha1 and A Jooste2 Abstract Relative change in agricultural prices determines farmers` investment decisions, productivity and income. Thus, understanding the factors that influence agricultural prices is fundamental for sustainable growth in this sector and the rest of the economy. This paper investigates the short- and long-run impacts of monetary policy changes on relative agricultural prices in South Africa by employing Johansen cointegration analysis and the Vector Error Correction Model (VECM) respectively. The results of Johansen cointegration analysis reject the long-run money neutrality hypothesis which suggests that the rate of increase in prices is not unit proportional to the rate of increase in money supply. On the other hand, the results of the dynamic relationships provide evidence of agricultural prices being overshot. Therefore, when a monetary shock occurs, the agriculture sector will have to bear the burden of adjustment, increasing farmers’ financial vulnerability. Consumers also have to absorb short-run price volatility and overshooting of prices which in turn impacts on their ability to manage their cash flow optimally; this could be a substantial challenge in poor households. Due to the linkages between monetary policy variables and relative agricultural prices, it is recommended that agricultural policy makers and monetary authorities work closely in designing and implementing monetary policy...
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...represents and what The Zeitgeist Movement hence condones, could be summarized as: ‘The application of The Scientific Method for social concern.’ Through the humane application of Science and Technology to social design and decision-making, we have the means to transform our tribalistic, scarcity driven, corruption filled environment into something exceedingly more organized, balanced, humane, sustainable and productive. To do so, we have to understand who we are, where we are, what we have, what we want, and how we are going to obtain our goals. Given the current state of affairs, many of which will be addressed in the first part of this book, the reader should find that we not only need to move in another direction…we have to. The current economic system is falling apart at an accelerating rate, with the prospect of worldwide unemployment occurring on the largest scale ever seen. Simultaneously, we are courting the “point of no return” in regard to the destruction of the environment. Our current methods of social conduct have proven to have no chance in resolving the problems of environmental destruction, human conflict, poverty, corruption and any other issue that reduces the...
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...tender by the government and is not backed by reserves or physical commodities such as gold or silver. The real value or intrinsic value is not equal to the monetary face value or the value that is declared on it. The monetary value of fiat money is a matter of public confidence in the political or economic stability of the government or issuer. In Canada, the issuer of fiat money is the Bank of Canada. The Bank of Canada declares our currency as legal tender. Fiat Money is important because it satisfies the characteristics that make our currency viable. First, it is generally and widely accepted by the people who use it. It is much more portable and easily divisible than precious metals such as gold. Security measures taken into account in currency design are important to avoid replication and counterfeiting. The other important characteristics in fiat money are durability and controllability. Fiat Money contributes to the goals of Macroeconomics by achieving consensus among the general population of its value and in the stability of the banking system. This allows creditors, investors and consumers to make good and rational decisions on the basis of sound expectations. This stability also relates to the relationship between money and the price level and the relationship between money and income, which is the basis of monetary...
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...2009 We start with the model of the late Hyman Minsky, a man with a reputation among monetary theorists for being particularly pessimistic, even lugubrious, in his emphasis on the fragility of the monetary system and its propensity to disaster. Although Minsky was a monetary theorist rather than an economic historian, his model lends itself effectively to the interpretation of economic and financial history. Indeed, in its emphasis on the instability of the credit system, it is a lineal descendant of a model, set out with personal variations, by a host of classical economists including John Stuart Mill, Alfred Marshall, Knut Wicksell, and Irving Fisher. Like Fisher, Minsky attached great importance to the role of debt structures in causing financial difficulties, and especially debt contracted to leverage the acquisition of speculative assets for subsequent resale. According to Minsky, events leading up to a crisis start with a “displacement," some exogenous, outside shock to the macroeconomic system. The nature of this displacement varies from one speculative boom to another. It may be the outbreak or end of a war, a bumper harvest or crop failure, the widespread adoption of an invention with pervasive effects---canals, railroads, the automobile---some political event or surprising financial success, or debt conversion that precipitously lowers interest rates. An unanticipated change of monetary policy might constitute such a displacement and some economists who think markets have...
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...KYAMBOGO UNIVERSITY FACULTY OF ARTS AND SOCIAL SCIENCES DEPARTMENT OF ECONOMICS AND STATISTICS COURSE UNIT: EC223 MONEY AND BANKING DATE OF SUBMISSION: NAME: KALULE RICHARD REG NO: 10/U/66/BEK/GV SIGNATURE Money can be defined as any thing that is generally acceptable as a medium of exchange. It can also be defined as a third commodity that is introduced between two other commodities to facilitate exchange. Money can therefore be looked at as an instrument that helps in fulfillment of contracts, discharge of debts and as a standard of deferred payment. Due to the obligation of people to accept money in the discharge of debts, money is often referred to as legal tender. The demand for money can be defined as the desire by the public to hold cash other than investing it in interest earning assets. it can also de defined as the desire by the individuals and businesses to hold their incomes partly in cash and partly in form of assets. The question of why do people demand for money has been a great topic of discussion among the economists from the days of the classical economists to the monetarists but like many other economic phenomena, no common consensus has ever been reached. Unlike the goods and services, money has no intrinsic value that is to say does not provide direct utility. Instead, the existence of money helps in improving the transactions where we obtain goods that satisfy human wants. Money is therefore useful because it provides an improved...
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...What is a better Monetary System: Bargaining or Money? So far, every monetary system ever implemented has been problematic. For instance, money, in its various forms, has been liable to manipulation. Metal money made from precious metals may be degraded by the issuer or filed, shaved, or chipped by individuals. Paper currency makes it more difficult for individuals to alter money but is more easily manipulated by the issuer, whether central authorities of individual banks. Bargaining and money are the two principal systems that markets utilize in buying or selling of both services and goods. Notwithstanding its weaknesses, money remains a better monetary system compared to bargaining. The imposition of limiting monetary policy in a disjointed wage bargaining context where workers have considerable bargaining rights can have perverse effects. Notwithstanding the tendency of liberal economists to point labor-market rigidities arising from government regulation and active trade unions as the source of unemployment, evidence exist that the nature of macroeconomic policy can also play a role. Macroeconomic policies are essential, especially in ensuring that wage-bargaining systems are able to deliver wage moderation that is favorable to low unemployment levels (OECD, 2011, p. 328). Centralized bargaining systems only work best under an accommodating monetary policy while bargaining systems organized at the industry level works efficiently under a non-accommodating policy. Therefore...
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...Macroeconomics assignment Name: Oumaima Anouar Module leader: Samia El Ouazzani A champion amongst the most known systems used to control the supply of money is the cash related methodology by which it is as often as possible concentrating on swelling or financing expenses to secure the dauntlessness of costs moreover, the normal trust in the nation's money and the cash related technique also tries to offer help with improving the fiscal advancement and steadfastness and to give more business open entryways besides, to keep up obvious exchange rates with various countries money related structures. Monetary technique can either be expansionary or contractionary . In case it is expansionary it grows the total of supply of the trade out the economy brisk however if it s contractionary it broadens the money supply continuously . In the latest year morocco lessened its credit cost from 2.5% to 2.25% and a significant extended period of time back it was 6.5% and each one of this to urge nationals to stop saving money and to start eating up also, spending logically moreover to ask outside budgetary experts to place assets into the country and even locals will start getting progressively money and eat up more which will be a gigantic favorable position for the economy in light of the fact that my reducing the advance charge we diminish the cost of securing money and each one of this will outcome of cutting down the rate of unemployment and growing optional income for customers...
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