Exports are autonomous of real GDP. Imports are determined by international prices, trade agreements, and the real domestic GDP. All things being equal: the lower foreign prices, the more liberal trade agreements and the higher domestic real GDP, the higher the imports become. According to a recent article in Washington (Reuters), dated November 13, 2004, written by Jonathan Nicholson, “a tax aimed at boosting savings, holds promise.” This is in response to President Bush and one of his ideas to get the economy moving again. Bush is currently proposing to reform the tax code.
increasing taxes and decreasing government expenditure. Increase in domestic savings (for instance by increasing interest rates) is paramount. Increase exports would also be of help. 3. Expansionary policies in Asia: decrease their excess savings and stimulate domestic spending (through structural reforms in financial system) and favor internal lending.
But a trade deficit would result in a currency depreciation for a country since there is more outflow of monetary payments to other countries. Interest rates are very important when talking about currency values due to several factors. First, when there are high interest rates, a country can expect many potential investors since they would expect higher returns. And when there are many investors, a country can expect foreign capital which would give the national currency an appreciation. On the other... ... middle of paper ... ...e jobs being offered within the country due to a decrease in off-shoring, there should be an appreciation in the currency value since there would be a increase in the balance of payment and trade.
Fama (1981) reckoned that the elementary relationship between monetary policies and stock market is built by the changes of money supply through policies made by the government and this relationship is a negative one. Loosening Monetary Policy: The loosening monetary policy lessens the interest rate of the whole economy, the discount rate of stock and thus increases the expectation and income of buyers. An enlarged money supply will make an increase not only in goods consuming but also in financial assets buying, which includes stocks. When money supply increases, liquidity of stocks also rapidly goes with the same trend. However, Cooper (1974) and Nozar & Taylor (1988) asserted that there is no relation between the money supply and the stock index despite the loosening monetary policy.
On the oth... ... middle of paper ... ...slightest as compare to others, because its indigenous production meets a larger share of its oil requirements so its GDP falling by 0.3% only. Japan’s GDP would reduce by 0.4%, This analysis presumes constant exchange rates and economic growth for the US economy. The present paper is the extension of the existing empirical literature in two directions. First, we have not focused on the oil importing US economy only , rather we analyzed the effects of an oil price shock in two different type of countries which include five oil exporting countries i.e. Saudi Arabia, Norway, Venezuela, Kuwait , Nigeria and five oil importing country i.e.
The first involves firm efficiency and depends on the externality in human capital production. Stock markets increase firm efficiency by eliminating the premature withdrawal of capital from firms. This accelerates the growth rate of human capital and per capita output. The second way stock markets can affect growth is to raise the fraction of resources devoted to firms. This does not necessarily depend on externalities but by increasing the liquidity of firm investment, reducing productivity risk, and improving firm efficiency, stock markets encourage firm investment.
The results suggest that Latin American firms increase their debt levels when inflation rises because in inflationary periods nominal liabilities, such as debt, depreciate in value, thus, become more attractive to the borrower. The ratio of stock market capitalization to GDP has a negative relation with all the dependent variables, as the capital market develop become a viable alternative; firms will tend to use less debt. On the other hand, the ratio of deposit money bank to GDP displays a positive relation with leverage - as the banking sector increases, firms will have more incentive to use more debt. For both variables, the results concur with Booth et al. (2001) and with Agarwal and Mohatadi (2004).
This applies when the country is facing inflation. The following graph shows the relation between BLR and OPR. Graph of OPR and BLR Retrieved from: http://www.bebas-hutang... ... middle of paper ... ...towards neutralizing the monetary conditions and preventing the risk of financial imbalances that could destabilize the economy recovery process. At the new level of the OPR, the standpoint of monetary policy continues to remain supportive to the economic growth. In conclusion, BNM raise OPR in order to overcome inflation and in opposed to recession, BNM reduces the OPR.
Open market operations directly affect the money supply through buying short-term government bonds (to expand money supply) or selling them (to contract it). Benchmark interest rates, such as the LIBOR and the Fed funds rate, affect the demand for money by raising or lowering the cost to borrow—in essence, money's price. When borrowing is cheap, firms will take on more debt to invest in hiring and expansion; consumers will make larger, long-term purchases with cheap credit; and savers will have more incentive to invest their money in stocks or other assets, rather than earn very little—and perhaps lose money in real terms—through savings accounts. Policy makers also manage risk in the banking system by mandating the reserves that banks must keep on hand. Higher reserve requirements put a damper on lending and rein in inflation.
Among the relevant flow indicators, one must analyze the following • The overall fiscal balance which is the difference between total revenue (including grants) and total expenditures plus lending minus repayments and reflects the links to the government’s net financing requirements and to the external current account. This however may not be a good indicator for the impact of fiscal policy on domestic demand or the government’s adjustment effort as it has the potential of masking underlying vulnerabilities. For example, with rising oil revenues a fiscal expansion through an increase in spending may be masked by an improving overall balance. • The analysis of fiscal policy over the economic cycle has become more critica... ... middle of paper ... ...il GDP, keeping non-oil revenues and total spending ratios to non-oil GDP unchanged. This approach helps to isolate the specific impact of changes in oil prices, but has some obvious drawbacks as it assumes local linearity between oil prices and fiscal oil revenue.