The Global Macroeconomic Environment

Good Essays
Question 1
The macroeconomic environment is a dynamic environment, which could not remain unchanged (Gajewsky 2015). There are many factors influence the global macroeconomic environment, such as interest rate, exchange rate, GDP,aggregate demand, monetary policy and other macroeconomic variable (Oxelheim and Wihlborg 2008). These factors are closely associated with commodity price.

For commodity price, the demand and supply are directly contributing to the price volatility. The changes in interest rates and exchange rates are significant influence for commodity output and it also has impact on the commodity prices (Dornbusch 1976). For example, based on the equation of AD=C+I+G+NX. If the government expenditure increases, it will tend to
…show more content…
During this period, global consumer price inflation presented a trend of fluctuation reduction. According to World Bank data (2015), world real GDP growth slightly which is from 2.4 to 3.3 in 2012-2016. Moreover, weaker investment environment lead to the job creation rate decrease of 1.4% every year after 2011, the unemployment rate is high correspondingly (world economic situation prospects 2016). Industrial commodities like energy, metals and minerals both decline more than 35 each from the beginning of 2011 to the end of 2014 and this trend will continue (World Bank 2015). Meanwhile, China as the world’s largest exporter and the second largest importer country, economic growth becomes slowing than before (Chen 2016). It has the significant impact on the global trading environment. At the same time, global trading volume…show more content…
There has a significant effect on reasonably sufficient liquidity in the banking system. Also, monetary and credit growth rapidly and stably, the market interest rates decreased conspicuously and maintain a stable exchange (China Monetary Policy Report 2015). In terms of fiscal policy, China sustains the proactive fiscal policy, boosts the infrastructure expenditure, accelerated reform the tax system and stimulates the economic growth (Jourdan and Lu 2015).

For the forecast, the PBC will adapt to the dynamic economic environment, to ensure the policies continuity and stability, maintain the prudent monetary policy and continuing a moderate elastic scope (China Monetary Policy Report 2015). In addition, Chinese government will remain a more proactive fiscal policy. They will moderately increase the financial deficit and preparing to make the biggest reform in the policy and avoiding the fiscal cliff, especially focus on the tax system and expand the effectiveness of government’s expenditure (Cevik and Carolina-Caro 2015). Meanwhile, China will strengthen the coordinate of monetary and fiscal policies, which stabilizing the Chinese economic
Get Access