Readers Question: How does inflation targeting operate when there is a deflation? and what are the problems associated with this? It’s a good question to ask at the moment, especially with regard to the ECB and Eurozone. Firstly, the EU inflation target is – below but close to 2%. If inflation falls below 2%, the …
Readers Questions: Could you not also argue not that the Euro is a failure but that it’s members/ECB are pursuing the wrong policy? Predictions of the death of the Euro seem to have been much exaggerated & surely Europe has the potential to be a world economic superpower to rival the US or China? It …
Readers Question: Given the current environment, is it a valid argument of companies that increasing workers salaries will cause a loss of competitiveness? For example, cutting entry-level and middle-level workers salary while increasing management salaries will not change the profit levels of a company much. Wages are a part of a firm’s costs. If wages …
Readers Question: How do bond spreads affect the value of the Dollar or Euro? A bond yield refers to the interest payment that you receive from holding the bond yield. If the yield is 4%, you can expect £4 a year from a £100 bond. A bond spread refers to the differences in bond yields. …
The Euro is the single European countries adopted by 18 out of 28 EU countries. The UK has not joined. The Euro involves: Common currency Common monetary policy – Eurozone interest rates set by the ECB in Brussels. Some fiscal rules, e.g. The Fiscal Compact (2012) limiting the amount of government borrowing (a balanced budget …
Readers Question: Europe is in grip of real deflation and low growth period but then why Euro is on a rise In recent months, European inflation has fallen to 0.5%. In several countries within the Eurozone, countries are now experiencing actual deflation. In the past year, the Euro has appreciated against a basket of currencies, …
A look at the effects of how an over-valuation of the exchange rate can cause deflation. Readers Question: does an appreciation in the exchange rate cause deflation? An appreciation does tend to reduce inflationary pressures. This is because after after an appreciation in the exchange rate: Price of imports will fall, causing a fall in …
Emerging markets are defined as economies which are making the transition from a low income / developing economy to a high income ‘developed’ economy. Key emerging markets include: China, India, Brazil, Mexico. Emerging markets are mostly based in South East Asia (excluding Japan) and Latin America. Emerging markets often have a high rate of economic …