............................... 1.0 Impacts Of Credit Crunch On U.S........................................ 1.1 Impact on U.S Economy...................................................... 1.2 Impact on Interest Rates...................................................... 1.3 Impact on Banking Sector.................................................... 1.4 Impact on Mortgages and Credit Lending Agencies............ 1.5 Impact on GDP..................................................................... 1.6 Impact on Inflation................................................................ 1.7 Impact on Employment in U.S.............................................. 2.0 Implemented Strategies To Overcome The Impacts............ 2.1 Fiscal Policy............................................................................ 2.2 Seek Direct Foreign Investment............................................. 2.3 Establish Proper Monitoring System...................................... 2.4 Strengthening the Country’s Internal Infrastructure............... Conclusion...................................................................................... References...................................................................................... INTRODUCTION “An immediate or sharp condition of unavailability of liquid money from the banks and money lending agencies in an economy is known as credit crunch”. The 2007-2009...
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...The initial idea to form the International Monetary Fund originated in the year 1944, when members of 45 countries gathered for a meeting in the town of Bretton Woods in New Hampshire in the United States. The objective of this meeting was to agree on a structure for economic cooperation between countries after the Second World War in order to avoid the negative impacts caused by the economic policies in the past which resulted in the Great depression of the 1930s.The International Monetary Fund was formally established in December in the year 1945 with 29 countries signing an agreement. Its membership gradually increased during the 1950s and 1960s with most of the African countries joining the International Monetary Fund after gaining independence. Currently, the International Monetary Fund has evolved to become an organization which consists of 188 member countries working with common objectives of promoting worldwide monetary cooperation, providing financial strength to countries, promoting international trade between countries, reducing unemployment and poverty in the world. The new countries who became members of the International Monetary Fund between the years 1945 and 1971 gave their consent to keep their respective exchange rates fixed at rates that can only be changed to revise a significant inequality in the balance of payments, and could only be done so with the consent of the International Monetary Fund. This system was referred to as the par value system or the...
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...The European Monetary Union (EMU) was established as a formal objective in 1992 from the Treaty of Maastricht. In 1995 initial details of a union currency “the Euro” was announced and in 1998 the European Central Bank (ECB) was created and in 1999 the Euro underwent a 3 year transition introducing the Euro notes and coins. The purpose of this text is to analyse in detail EMU’s macroeconomic framework and performance and how this has evolved in the past 10 years. Firstly, I will look into the fiscal policy set out by the EMU however the bulk of the text will look into the monetary policy framework. Finally I will conclude by briefly trying to pin point the links between the macroeconomic framework to the current Eurozone crisis. In general on average the Eurozone’s first decade is viewed as a success and the ECB met its targets by delivering low and stable inflation with an output gap consistently close to 0. However, if we inspect country by country, we witness a large variation. The macroeconomic framework of the EMU, takes 2 main forms Fiscal policy and Monetary Policy. National governments are responsible for their individual fiscal policy while the ECB undertook the responsibility of Monetary Policy. Under the umbrella of Fiscal policy, the Stability and Growth pact provides a clear economic boundary to all Eurozone members. The Stability and Growth Pact specifies 2 boundaries. Firstly, national budget deficits must be kept below 3% and secondly the ratio of the government...
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...Portugal’s Economic Crisis A series of economic-plummeting activities has plagued Portugal since 1999. Until 2011, the country has been covering up their genuine economic crisis. It wasn’t until they requested financial assistance from The International Monetary Fund and the European Union in April 201l, that their crisis was revealed. There are several debates on the reasons for Portugal’s bailout request. Robert M. Fishman, a professor of sociology at the University of Notre Dame, argues, “[Portugal’s third national request for a bailout] has come under unfair and arbitrary pressure from bond traders, speculators and credit rating analysts.” With this statement, he claims that Portugal’s bailout request didn’t result from a debt, but rather the threat of these market forces that have pushed out the prime minister of the country for a four-month period. With the absence of this democratic government, Fishman debates further that there was not a genuine underlying crisis in Portugal. (Fishman, Robert. The New York Times (The Opinion Pages) Portugal’s Unnecessary Bailout. April 12, 2011) The truth is that Portugal has had an underlying crisis for years but has managed to shift from the global public eye. According to David R. Cameron, professor of Political Science at Yale University, “there has been a recurring imbalance between spending and revenues.” This leads to my first solution, which is to have Portugal abandon their current fiscal policy. This would help cure the...
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...Executive Summary Introduction Eurozone debt crisis, which is also known as European Sovereign debt crisis is an on-going financial crisis that the countries within the Eurozone such as Ireland, Italy, Portugal, Greece and Spain varying a certain degree that faces struggles to repay or refinance their government debt without the assistance of third parties. This has caused much worries faced by the European Unions and hence to the above crisis, thus causing a great impact beyond the borders to the world as a whole. We will look into various roles undertaken by the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) in helping to solve the euro zone Debt Crisis. European Central Bank (ECB) The ECB is one of the seven institutions of the European Union which was listed in the Treaty on European Union where it administers the monetary policy of the 17 EU members’ states where euro zone is consider one of the largest currency areas in the world. Founded in 1998, the central bank is one of the most important in the world with more than 500 billion euros in its reserves. Currently, the bank is based in Frankfurt, Germany and led by Jean-Claude Trichet. The primary function of ECB is basically to implement monetary policy for Euro zone, responsible for the care of foreign reserves of the European System of Central Banks, and to promote and conduct smooth operating of the financial markets and foreign exchange functions. In addition...
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...Writer’s Name Instructor’s Name Course Date Economics Federal Reserve System Federal Reserve System or FED is basically a central banking system of USA that created on December 1913, due to severe financial conditions. Now this is playing different functions for boosting the USA economy those are: * Working as a central bank for United States * Address about the financial severe problems * Regulates and instruct the other banking systems * Control monetary policy through manage the money supply in the economy * Provide the financial facilities to other financial institutions, US government to strengthen the economy of US * Provide the major facility of exchange of payments in the different regions. * It also play a role in maximizing employment, stability of price level as well as long term moderate interest rate in the economy. * Open market operations in which selling and purchasing of government securities occurs by the FED. These operations are in the control on the FOMC. So it basically plays a role in providing largest payment system in the world. Every day many transactions occur between the different sellers and purchasers of goods in term of US dollar. It also maintains millions of accounts as well as performing a role in settling and clearing different financial institution payments through intermediaries. FED play a vital role in providing the facility of financial services to depository institutions like distributing currency...
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...Exit From Crisis And The Post-Crisis Development Of The Baltic States As a result of accessing the European Union (EU) in 2004 the Baltic states benefited from an accession-related boost to income convergence and a credit-driven boom continued. While recognising the rapid growth as well as the increasing level of income, employment opportunities and rising living standarts, it was already in 2006 when the International Monetary Fund expressed concerns about overheating of economies of the Baltic states1. When the global financial crisis or “the four horsemen of financial crises: “sudden stops” in capital inflows, asset price collapses, recessions and fiscal deficits”2 hit, the Baltic states were no exception. There are different views about the exit strategy from the financial crisis of the Baltic states. Defenders point to recent rapid growth. One can look at the GDP annual growth rates for years 2006-2014 for the Baltic states - the GDP decreased rapidly during crisis, reaching its lowest point in 2009 for all three Baltic states. After 2009 the GDP annual growth rates increased, howerver, at the end of 2012, GDP of, e.g., Latvia was still below its pre-crisis level; Lithuania and Estonia had done better. Taking a look also at the GNI annual growth rates for years 2006-2014 for the Baltic states, the decrease in the GNI rate, e.g., for Latvia continued until 20103, showing that even though the value of goods and services produced in the country increased, less...
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...multinational firm which is operating in UK and it has several stakeholders which can be categorized into two groups, internal stakeholders and external stakeholders and also Next plc as an organization has it aims, objectives and goals which they target to achieve in future though they have achieved some in present too. Economic system is an organized way on how allocation of resources in an economy is done, how goods required by the consumers have been produced and how it is distributed, basically there are three types of economic systems where in all three economic system allocation of resources is done by different parties. Economic policies are implemented by the government the economy, both policies that the government use have a direct impact on country’s economy. Next plc as an organization also can affected when the government implements economic policies to the country’s economy. Next plc exports products to other countries and by doing this it enables international trade to take place. International trade brings several advantages to Next plc but it also must face certain issues due to international trade. Certain countries over the...
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...the Esquel Group China and the Esquel Group In response to criticism of it pegging the Yuan to the US dollar, China recently implemented steps toward liberalizing its exchange rate policy; however, a floating Yuan has created uncertainty concerning its impact on China’s economy. While it is likely that allowing the Yuan to appreciate against the US dollar will result in undesirable impacts for China such as deflation, a reduction of foreign direct investment (FDI), and a decline in exports, we believe China will, and should, continue a tempered liberalization of its exchange rate policy. This is necessitated by the potential consequences China faces both politically and economically by not moving towards a floating rate. Politically, China will continue to absorb the majority of the blame for foreign countries’ rising trade deficits, spawning potential legislation dictating import quotas on Chinese products. Economically, a fixed exchange rate will continue to plague China by its dependence on exports and increase its risk of being able to maintain the value of its portfolio of foreign reserves, most notably the United States dollar. It is our belief that these risks outweigh the benefits of China continuing business as usual. As such, the Esquel Group should devise operational strategies that mitigate the risks of an appreciating Yuan, which include diversifying revenue streams by implementing a textile import division, pursuing growth in domestic textile sales, and exporting...
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...economy is largely dependent on exports, some examples are IT-related, user electronics products, pharmaceuticals, and financial services industries. For instance, the republic has one of highest volume in export refineries around the globe, oil exports accounted about 68.1m tons in 2007. The O&G industry accounted for 5% of Singapore’s GDP as well. (Economic Development Board, n.d). According to Strait Times: Singapore secured position as the second freest economy in the world in 22 straight years, the acceptance to global trade & investment remains to contribute a sturdy support for economic dynamism in Singapore. One of the key events happened past decade in Singapore is the collapse of Lehman Brothers that leads to financial crisis in 2008. The Republic takes the lead among the East-Asian countries to fall into recession in 2008. As a result, the economy declined 0.6% but has bounced back as much as 15.2% in 2010 due to power of resumed exports (Central Intelligence Agency, n.d.). Real Gross Domestic Product (GDP) is vital/important in the national income accounting. GDP means the entire market cost of all end goods & services along the time frame provided from different...
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...The International Monetary Fund (IMF) was originally established in order to encourage international co-operation to cope with recession and protectionism on a world scale and to discourage individual countries from pursuing policies that would beggar their neighbors and eventually themselves. The desire to improve on the international chaos of the 1930s led to the Bretton Woods Conference in 1944, and an attempt to devise a financial system which would provide a more permanent and acceptable framework for international transactions. It was intended that the emerging Bretton Woods system would generate benefits for international trade in the form of stable (though not necessarily fixed) exchange rates, while at the same time, avoiding the deflationary rigidities of the gold standard mechanism. The system was designed to ensure a world of full employment and economic growth. This paper will examine a few of the negative and positive aspects the IMF has had since its inception, and how it has evolved over time to answer the question, is the IMF a sinner or saint? If the general purpose of the IMF at its inception was to oversee the operation of the infant Bretton Woods system, its more specific purposes were spelled out in Article 1 of its Articles of Agreement as follows: | (i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems. | | (ii) To facilitate...
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...Chinese policies to tackle inflation Abstract: India and china the two Asian giant, have shown economic growth in last few decades. The expansion of the economy brought high inflation in both countries. Inflation impacts all types of the consumers while rich or poor, it will become a real problem if the countries didn’t adopt policies to decrease the inflation rate. India and china have a very fast economic growth with fast population. The government and the central bank have to work beside to curb the inflation using two main policies are monetary policy and fiscal policy. In the monetary policy the central bank has to manage the many supply in the market and also control and decline the inflation, in terms of fiscal policy the government try to see the tax level to impact in the inflation rate. Monetary policy has more effect than fiscal policy, but also there are challenges implementations of the policies. Argument 1(monetary policy) India has faced a hyperinflation in years 2009 to 2011 to unprecedented level. The inflation in India affects the saving of the Indian household which decreased the value of saving in that nation. The monetary authorities are trying to impact the money supply directly without creating deformation in the economy by changes CRR (cash reserve ratio), repo and reverse repo rate. The main objective is to maintain price stability. The RBI (reserve bank of India) trying to control the money supply by using which called contractionary monetary policy...
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...Introduction The financial crisis of 2007–08, also known as the Global Financial Crisis and 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. It threatened the collapse of large financial institutions, which was prevented by the bailout of banks by national governments, but stock markets still dropped worldwide. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of U.S. dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis. The active phase of the crisis, which manifested as a liquidity crisis, can be dated from August 9, 2007, when BNP Paribas terminated withdrawals from three hedge funds citing "a complete evaporation of liquidity". Many causes for the financial crisis have been suggested, with varying weight assigned by experts.The U.S. Senate's Levin–Coburn Report concluded that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street." The Financial Crisis Inquiry Commission concluded that the financial crisis was avoidable and was caused by "widespread failures...
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...CRISIS MUST BRING CHANGE IN THE AIRLINES INDUSTRY IN MALAYSIA. INTRODUCTION Airline can be described as provide air traffic services to passenger from origin to destination. Airlines also can be known as oligopoly market structure. This is because only few firms that involve in producing similar or differentiated product, that is air traffic services. Many characteristic or factor that make airline as oligopoly market structure and ca n be categorized as high barrier to entries. Because of that, small factor can be easily affect and bring the airline into crisis. The industry generates substantial cash flow to repay debt and buy new airplanes, which, like most tangible goods, depreciate over time. The industry also is distinguished by the amount of time and effort which must be concentrated on customer service, requiring a high amount of labour. More than one third of airlines’ revenue is consumed by the industry’s work force. Revenue from aircraft industry can be simplified as from sources such as passengers (75 percent), cargo shippers (15 percent) and other transport services. About 80 percent of passenger revenue comes from domestic tickets, while frequent flyers, which travel more than 10 times annually, constitute about 40 percent of trips but only 8 percent of the total flying public. What is ‘crisis’? A crisis is any event that is, or expected to lead to, an unstable and dangerous situation affecting an individual, group, community or whole society. Crises are...
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...Challenges to Pakistan’s Economy - Proposed Remedies & Solutions. Professor Dr. Shahida Wizarat Paper presented at the pre-budget seminar organized by the Southern Regional Committee of (ICAP), at Marriott Hotel, Karachi. 10 April 2008 1. Introduction All the serious challenges Pakistan’s economy is facing today like very wide budget and trade deficits, galloping inflation, increase in the level of poverty, power outages, water shortages, closure of industries, food insecurity, etc, has diverted our attention from realizing the very serious challenge that we have overcome. Since the 1950s we had a system in this country where the Ministry of Finance and all the economic ministries were headed by World Bank and IMF officials of Pakistan origin. With increase in the indebtedness of the country the situation got from bad to worse. The worst period was the decade of the 1990s when not only the economic ministries, but even prime ministers came from these institutions. During negotiations between the Government of Pakistan (GOP) and the International Financial Institutions (IFI)s it was difficult to distinguish between the GOP and the (IFI)s, for both sides comprised of IFI officials. These were very trying times for those of us who value independence and economic sovereignty of the country. I wrote several articles questioning the wisdom of a system which even...
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