Readers Question: The task of MPC is to stabilise inflation at 2%. Current inflation is around 5% and the Bank of England has to tighten the Monetary policy to control the inflation. If the Government revises the inflation target and set it to 5%, then what would be the effect on the economy and what …
Italy has struggled to reduce national debt as a % of GDP since government debt has risen to over 100% of GDP in the late 1980s National Debt Italy Italy has the second highest public sector debt in Europe, after Greece. The IMF predict public sector debt of 123.4 % of GDP in 2012. By …
Readers Question: I am wondering why the 75 billion of quantitative easing that the Bank of England announced today to be “injected into the economy” isn’t spent on infrastructural projects? Why spend those funds on government bonds? This doesn’t seem to be the best way of using these funds. Many thanks. It’s a good question. …
Ireland has faced tremendous economic turmoil in recent years. Government debt has soared after the banking bailout and effect of a deep recession. The economy has faced a combination of Falling house prices bank losses and decline in bank lending Fiscal austerity (government spending cuts) to try and solve budget deficit. All these factors have …
In 1980, Mrs Thatcher made a memorable speech. “To those waiting with bated breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The lady’s not for turning!”(BBC Link) Background – The economy was struggling under the deflationary fiscal and monetary policy. Mrs Thatcher …
The UK economy faces a few paradoxes. Low Growth – High Inflation. Firstly, after a deep recession the economic recovery is weak. In theory, high unemployment and low growth should lead to low inflation. However, due to rising energy and food prices, we have inflation above target. This presents a conundrum for the Bank of …
For manufacturing investment, the real interest rate is important for determining the viability of investment. Lower interest rates make it cheaper to borrow. Therefore lower interest rates tend to encourage business investment. High real interest rates discourage investment. How interest rates affect the efficiency of investment At lower interest rates, the marginal efficiency of capital …
Readers Question: Does growth forecast always corresponds to the mesured growth? If a bias exist, is it always on the same side? Recently, growth statistics published on February 26th showed that the GDP figures for the fourth quarter of 2009 were a higher than first recorded. GDP grew by 0.3%, rather than the initial estimate …