It should be noted that there are many opposing views to the effectiveness of the monetary policy in the achieving of its goal of inflation target in South Africa and is seen through (Dr Mollentze, 2014). The monetary policy can be used in both the short term and long term in order to achieve steady growth in output, low inflation and achieve full employment as st... ... middle of paper ... ...how that for the NDP to be successful, “the five common characteristics of high growth economies…” are necessary of which monetary policy could aid with the macroeconomic stability and the mustering of high rates of savings and investments. Thereby addressing the aggregate demand balanced equation of by simultaneously increasing: savings and investment; government expenditure and taxes, which would lead to growth of the economy and also alleviate poverty. So a better implementation strategy and economic environment would result in the NDP being successful while incorporating NGP goals, the better economic environment would facilitate the expediency of the monetary transformation mechanism. Both of these requirements would also be aided by a more “credible and capable government” (Laubscher, 2014) being one of the characteristics required for a high growth economy.
Our individual economic life is impacted by the decisions made in our economic policies. Thus making the country’s economic performance significant. Some of South Africa’s macroeconomic objectives are: inflation between 3% -6%, relative price stability, low unemployment, sustainable economic growth, exchange rate constancy and balance of payments stability. The biggest challenge for any economy however is to achieve these goals all at the same time.These objectives prompt for government to intervene in the economy, to try and achieve most of these objectives at the same time. Therefore it is imperative that policy creators prioritize these objectives.
AFEAEM734 Macroeconomics for Banking and Finance Coursework Explain, with reference to one real world example, the role played by central bank independence in improving inflation performance. Introduction The aim of the assignment is to evaluate and analyse the role played by central bank independence, henceforth CBI, in improving or lowering inflation. There have been countless investigations into this and the general consensus points out that the relationship between CBI and inflation is negatively correlated, meaning that the more the degree of independence a central bank has the lower the inflation. However there have been questions raised regarding the above hypothesis, which I will touch upon throughout the assignment. For example does the same level of independence in a developed economy produce the same level of price stability in a transitional economy.
In Keynes’ ... ... middle of paper ... ...dor, Robert Solow and Paul Davidson. New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It has developed partly as a response to criticisms of Keynesian macroeconomics. One of the new Keynesian economists, Robert Solow, advocated many Keynesian interventionist policies as senior economist to the Council of Economic Advisers during the Kennedy administration, which became conventional wisdom. In his words “My view is that we know no better way of running an economy than market capitalism”, however “there are times when there will be prolonged unemployment and governments ought to try to fix that.” This is abundant proof that the basic Keynesian approach is still relevant today as in a recession or depression; use of public spending to boost spending and employment is effective.
The third group claims that inflation has a negative impact on growth (Friedman 1956), (Stockman 1981), (Gylfason 1991), (Gylfason, Output Gains from Economic Stabilization 1998), (De Gregorio 1992), (Barro 1996), (Andres and Hernando 1997). The fourth group assumes that the liaison between inflation and output growth is nonlinear, suggesting that inflation has a positive or no impact on economic growth below a certain level, however, once inflation exceeds that level, it becomes harmful for economic growth. Nonlinearity in the link between inflation and economic growth was first studied by (Fisher 1993). He found that low inflation rates have a positive impact on growth while high inflation rates have a negative impact on growth. (Sarel 1996) found evidence of a significant structural break in the function relating inflation to growth that occurs when the inflation rate is 8%.
"Macroeconomics is a branch of economics that deals with the performance, structure, and behavior of a national economy as a whole. Macroeconomists seek to understand the determinants of aggregate trends in an economy with particular focus on national income, unemployment, inflation, investment, and international trade" (Wikipedia, 2007). Government tends to use a combination of both monetary and fiscal options when setting policies that deal with the Macroeconomic. According to McConnell & Brue (2004), governments make adjustments through policy changes which they hope will succeed in stabilizing the economy. Governments believe that the success of these adjustments is necessary to maintain stability and continue growth.
The aims of COSATU are: to fight for employees’ rights through social and economic justice for all employees; to understand the economy, how it affects employees and devising alternative policies on the structure of the economy to benefit all those employed; to seek just living standards, fair working conditions for all those employed and social security. (Congress Of South African Trade Unions, 2006) On February 24, 2014, the South African Minister of Finance, Pravin Gordhan delivered the 2014 Budget Speech, in which it is highlighted that South Africa’s economic growth is targeted at 5 percent per annum. It is further highlighted that the government’s plan to achieve this target is through public investment, a tax incentive to encourage youth employment, improve the quality of education and further investment in renewable energy and to support the adjustment to a low-carbon economy. After the 2008/2009 Global economic crisis – in which countries most countries have not yet recovered from, including Germany and the United Kingdom, whom are South Africa’s major trading partners – the economy still remains in a recession. Thus, in order to coun... ... middle of paper ... ... 2006.
France, Germany, Luxemburg, Belgium, Spain, Italy) and these economic indictors mentioned as well as others. We will start to look at inflation rates. "The British economy has slowed over the past 12 months, but remains among the strongest in the developed world, a report has said" (BBC News Online). Last month the Underlying rate of inflation in the UK remained unchanged at 2.3%, which is below the governments target rate of 2.5%, this is good for the economy. The headline rate of inflation, which includes mortgage interest payments, fell last month by 0.4% to 1.7%.
Projections by the Bureau of Labor Statistics do not give us much hope for a quick return to full employment. “Slower projected growth in the civilian non-institutional population and declining labor force participation rates limit growth in the labor force, which in turn limits economic growth.” The growth in the labor force from 2012 to 2022 is projected to be .5% per year. That is down from the .7% in the years from 2002 thru 2012. (U.S. Department of Labor Staff, 2014) Inflation “The latest annual inflation rate for the United States is 1.5% through the 12 months ended December 2013, as published by the US government on January 16, 2014.” ( CoinNews Media Group LLC Staff, 2014) The lowest inflation rate for the period of 2007 thru 20... ... middle of paper ... ...rom-the-economy-in-2014/ McConnell, C. R., Brue, S. L., & Flynn, S. M. (2012). Economics: Principles, Problems, and Policies - Nineteenth Edition.
Macroeconomic policy is a phrase used to describe actions taken by governments to manipulate the economy to influence the level of inflation and unemployment. Along with balance of payments and high stable economic growth, low inflation and high employment are two of the main four macroeconomic goals of the government. In practice, macroeconomic policies could be used to refer either to policies sought to influence aggregate supply or to policies that sought to influence aggregate demand. We will investigate aggregate supply and aggregate demand both in the long run and in the short run and show their effects on macroeconomic policy. In this graph we can see that as a result of a decrease in income taxes, aggregate demand will shift to the right from AD to AD1.