Since the results showed that open economic policy can cause the depreciation of RM/USD, Malaysia should maintain the policy of open economic. Open economic policy has successfully raised Malaysia position in the international trade. Currency depreciation increases the competitiveness of Malaysia exporters and encourages domestic producer and importer to venture into cost effective production mode to save costs. Although increase in Malaysia trade balance tends to depreciate RM, but the control of Malaysia on the trade balance is limited as the increase in trade balance depend on the purchasing power of the foreign importers and the competitiveness level too. Results also indicate that increment in domestic interest rate will dampen our exchange rate and increase in money supply, on the other hand, strength the RM.
Asset Allocation Free trade enhances the allocation of worldwide assets. if the countries or individuals can do a trade for the things they require, they can concentrate on making the ones they do best. Imports have a tendency to suppress inflation,... ... middle of paper ... ...wever under fix exchange the government needs to maintain the exchange rate and in order to do so they have to sell their foreign assets and reserves against the local assets leading to a reduction in the foreign reserves of the country. Therefore the monetary policy is ineffective under fix exchange rates. REFERENCING: Jackson, J (1993) Basics of macro economics, Macro economics journal, 833-14 Keynesian (1899) Keynesian Theory and its implication, Journal of Macro Economics, 248-95 Ferguson, Brian S. (2013) General theory of employment, University of Guelph, Discussion papers, 2013-06, 186-49 Vroey, M (1994) Nash equilibrium & working, Journal of Business Economics, 208-89 Jacob, B (1987) Fixed Exchange rate policies, University of Cambridge, London, 293-97 Walt, H(1993) Monetarist theory & Classical Theory, McGraw Hill, London Press, London, 98- 122
The occurrence of free trade import and export can be done without the barriers to pay the duties from the businessmen. The growing of the economy will increases the demand of the goods and services. As the result, when the demand increases, the opportunity for businesses will increases and with the boost up of these matter, it will create more job opportunities to the people in the white collar and blue collar sectors. Besides that free trade encourages strengthen the development of a country’s institutions, in order to protect the country’s eco... ... middle of paper ... ...ate by others. The country should create more competition to bring more opponents into certain industry such as in technology industry, agriculture industry and automotive industry.
Even today, the United States continues to support free trade, an example being NAFTA (North America Free Trade Agreement). The problem is that America’s generosity has caused the foreign industry to take over the U.S. marketplace. This unfortunately has resulted in high unemployment rates just because consumers and firms can purchase foreign goods for a little less than domestic products. But with this country’s abundant resources, is free trade really necessary? From a conservative viewpoint, the only remedy to decrease unemployment and stimulate our own economic growth is to abandon the free trade policy and raise tariffs.
Globalization is great for the American economy; we can supply the world with our goods and services, which in turn can possible, relieve the deficit we’re in. “Homegrown industries see trade barriers fall and have access to a much wider international market. The growth this generates allows companies to develop new technologies and produce new products and services.” (Buzzle) Also, globalization leads to better relations between countries when they create trade agreements. Globalization does not drain every under-developed company but brings a new era of economic change and the hope of being a world super power to certain nations. “Economic globalization gives governments of developing nation’s access to foreign lending.
The economic liberalization of trade globalization can reduce resource wars and civil wars influenced by natural resources. Integration would generate state interdependence preventing the risk of conflict between trading states. Independent states in the past have shown to be unstable and have been the political and economic causes of war on a global scale. Economic globalization and economic integration produces a neoliberal market, interdependent states, and stable governments reducing the probability of conflict and war. Neoliberalism opens the global market for freedom of exchange limiting government intervention preventing the government from gaining capital from corrupt means, such high taxation rates on foreign goods so that the demand for domestic goods increase leading to economic growth.
Whether they believe that the tax rate is too high or too low, there is always something to gripe about. The best policy to aid an economy’s recovery or give it an additional boost in boom times is always a tax cut. This can be engineered either as a straight up tax cut or as a rebate to taxpayers. Both methods leave more money in consumers’ and companies’ coffers, allowing them to spend more freely. This additional money in the economy causes a greater demand for goods, which in turn drives companies to produce more products.
Because of this, domestic industries tend to do much better; leading to even more employment opportunities, higher salaries, etc., which will help to stimulate the domestic economy. When other counties respond to this by devaluing their own currency, it is known as a currency war. There are almost always no victors when it comes to currency wars. This book describes these currency wars in great detail and attempts to illustrate how chaotic and disastrous that they can be. Because of this, Rickards promotes doing away with currency wars.
Neoliberalism encouraged borderless global affairs for international competitiveness. Furthermore, Neoliberalism view on redistributive tax system differed from the Keynesian theory. According to the Neoliberalism Theory “Unlike the Keynesian model, tax cuts to the poor and middle classes are not necessary to stimulate consumer demand. This is because it is supply that drives the economy, not demand. Rather, cuts in taxes should be directed toward the wealthy and business to induce savings and investments.” (Introduction to Business, Government, and Society, Page 83) This resulted an increase in poverty.
Free trade agreements set up international bureaucracies to govern the participants. It also ensures that all parties comply with the terms of the trading agreement. The problem with free trade in America is it generosity has caused the foreign industry to take over the United States marketplace. This has resulted in high unemployment rates because the consumers and corporations can purchase foreign goods for a little less than domestic product. If each nation can produce what it does best and permits trade, over the long run everyone will enjoy lower prices and higher levels of output, income and consumption that could be achieved in isolation.