This commentary will evaluate the effects of expansionary monetary policy in Turkey. Expansionary monetary policy is the increase in money supply and interest rate (cost of borrowing or return from saving) manipulated by the central bank. The central bank is the monetary authority which controls the overall supply of money in an economy. According to article, Turkey’s economy has suffered this year because of bombings and a failed coup. Its key component of the economy, tourism, has taken the hit which means Turkey’s exports has decreased, so Turkey’s net export might have decreased. Since net export is a component of aggregate demand (total demand for a nations’ output from domestic and foreign consumers), Turkey’s aggregate demand may have decreased, so …show more content…
Firstly, it may lead to short-run economic growth and reduce unemployment rate. Besides, it may have supply-side effects if the government spend money on infrastructure or education, so it may lead to long-run economic growth. However, it has limitations. Firstly, it takes a relatively long time for Turkish government to deliberate the policy. Besides, the politicians may implement the policy which is popular among voters even if it’s irresponsible for the economy. It may also cost Turkish government a lot of money. Turkish government can also implement supply-side policy (manipulation by the government aimed at increasing aggregate supply) like deregulation and investment in infrastructure. This may help Turkey achieve long-run economic growth and reduce the natural rate of unemployment. But it may cause environmental pollution and takes longer time to deliberate the policy. Overall, the expansionary monetary policy in Turkey may bring both advantages and disadvantages. It’s believed that this is the most effective policy for Turkey since it can be enacted more quickly by the central bank and the policy decisions are made purely based on the facts of the
Throughout Eveline Adomait and Richard Maranta’s Dinner Party Economics there is continuous discussion surrounding the problems that economies face around the world and the various methods that can be used to alter the state of the current economic conditions. Changes in consumer spending patterns can become a problem for the economy as a whole, potentially resulting in over-inflation or recession. Implementing discretionary policies such as monetary policy through changing interest rates, and fiscal policy through taxation and government spending, makes it possible to fix these economic problems.
Monetary Policy involves using interest rates or changes to money supply to influence the levels of consumer spending and Aggregate Demand.
In the study of macroeconomics there are several sub factors that affect the economy either favorably or adversely. One dynamic of macroeconomics is monetary policy. Monetary policy consists of deliberate changes in the money supply to influence interest rates and thus the level of spending in the economy. “The goal of a monetary policy is to achieve and maintain price level stability, full employment and economic growth.” (McConnell & Brue, 2004).
In order to accurately and successfully forecast, investors analyze the economy in coordination with industry life cycles. The economies effect on an investment depends greatly on the businesses industry and life cycle. In addition, the government influences economic activity by controlling the supply of money. This economic control is accomplished by altering the reserve requirements and discount rates, through the monetary policy. As a result, the government can either incorporate an expansionary or contractionary monetary policy into the economy. An expansionary or loose monetary policy is sought to boost the economy by increasing money supply through decreasing the Federal Reserve. The expansionary act has been shown to
Turkey’s economy has weathered some spectacular pratfalls in the past, with a major economic crisis in 2001 almost bringing the country to its knees. What’s different in 2004 from the previous "recoveries" is how committed Turkey is to establishing firm economic footing once and for all. The government is swallowing the International Monetary Fund’s painful economic medicine, making tough choices for fiscal discipline.
An expansionist monetary policy in which the RBA increases the money (M) supply may cause prices (P) to rise. While an increase in money supply would likely result in the exchange rate of the dollar (E) to fall.
An increase of local employment- in free trades more and more jobs will be created which in return will increase the employment rate in the country.
Economic growth defined as increasing the capacity of an economy. It used to produce goods and service which compared from one period of time to another. Also, it measures the change of real national output in short period. Whereas, long term growth shown to increase the potential Gross Domestic Product (GDP). Thus, economic growth plays an important role in the entire nation. This is to see whether the country is well developed or vice versa. On the other hand, economic growth creates high tax revenues to cut down government’s expenses. Therefore, it will reduce government borrowing and debt to GDP ratios. Indirectly, high increase make better standard of living. Besides that, more selection of goods and services are there for consumers. Again, more investment will be available cause of good economy growth. Last but not least, a good economic in a country improving public services. For example, government spends more on education and development areas. This is to ensure that good infrastructures are there.
In the end I can suggest that Fiscal and monetary policy of Pakistan has great effect on the economy of the country the coefficient of monetary policy is higher than the fiscal policy which shows that the monetary policy of Pakistan has more concerned with the economic growth than the fiscal policy. In result of this the policy makers should much more focus on the monetary policy than the fiscal policy as compare to its importance to boost up the economic growth. And on the other hand if we talk about the fiscal policy it can also help to enhance the economic growth by eliminating corruption from the country, proper allocation of the resources and control over the wastage of resources. In the end we can suggest that a developing country like Pakistan cannot survive without the effective fiscal and monetary policy.
The government plays an important role in a nation’s economy. Their decisions on what policies to push through, and which ones to leave on the table influence both their citizen’s and their economy. Since a nation’s government is one of the largest groups of unified people in a country, their policies can have a profound influence.
Economic growth also play a role in reducing debt to GDP ratios. Therefore, money can be spent on protecting the environment. With higher real GDP a society can dedicate more resources to promoting recycling and the utilization of renewable resources investment. Economic growth encourages investment and therefore encourages a virtuous cycle of economic growth.
Unemployment issue can lead to a lot of impacts to the economic growth. Higher unemployment rate will lead to increase government borrowing. When people are without their job, they would paid less in the income tax. So, it will cause a drop in tax revenue because there are lesser people paying income tax and spending less. Due to the loss of earnings to the unemployed, the government need to spend more subsidy for them in housing benefits and income support.
...nvironment, they save people money. The money saved will be spent and therefore, the economy will be stimulated.
Also government always want to prevent a depressions, to avoid this situation, which occurs when there has been long recession and degradation for over several years. The results of this process appear as increased unemployment , huge poverty, reduced credit, a shrinking GDP and overall economic volatility.
Privatization leads to adoption of the global best practices to foster sustainable competitive advantage and improvised management of resources. Private companies will adopt the latest technology for the increase in output and their profits. This will result in the increase in national product, thus national income of the country will grow.