Case study flashcards
India Interventionist Supply Side Policy (both)
India plans to monetise $81 billion worth of state assets over the next four years under a program announced earlier in the 2021/2022 budget to boost infrastructure spending and spur economic growth in Asia’s third biggest economy.
Invest in: gas pipelines, roads, railway stations and warehousing facilities
Australia Market Based Supply Side Policy
Scott Morrison has claimed that businesses will save an estimated $430m annually from deregulation measures, including cutting greenhouse gas, pharmaceutical, occupational licensing, childcare and international education reporting requirements. (AUSTRALIA COVID RECOVERY)
China consequences of economic growth
PM2.5 concentration in China air is currently 3 times above the WHO annual air quality guideline. This is a result from all over their economic growth and industrialisation.
China GDP per capita more than doubled over the past 10 years
The unemployment rate and GDP per capita have been drastically improving at the expense of the environment
Between 1981 to 2015 the poverty rate decreased from 88% to 0.7%
Expansionary Fiscal policy (during recession)
American Recovery and Reinvestment Act (ARRA): to combat the great recession of 2009. The Act consisted of $787 billion in spending (later raised to $831 billion) in tax cuts/credits and unemployment benefits for families; it also earmarked expenditures for healthcare, infrastructure, and education. Was considered effective. Also laed to a drastic increase in debt throughout the following years
This also leads to long term economic growth
Korea economic growth (affects/consequeneces)
South Korea underwent an IMF crisis in 1997. However, the country economically grew significantly, affecting the living standards of the people and making the unemployment rate less. But the inflation has increased temporarily to around 7.5%, much higher than the norm
Deflation in Japan example
Japan has been struggling with deflation for more than two decades. While price cuts look good to consumers, steadily falling overall prices can lead to a negative cycle of low corporate investment and sluggish wages. As of 2020, their goal is 2% inflation rate.
This is due to negative wage increases and a deflationary mindset
Monetary policy during a recession example
Monetary policy was also employed during the 2009 Great Recession; The federal reserve’s fund rate was lowered to 0% and the discount rate was set to 0. The federal reserve employed another method of expansionary monetary policy called “quantitative easing”, where where a central bank buys (long term) government bonds or other financial assets, in order to stimulate the economy and increase the money supply. This was much more effective
COVID Fiscal policy
There was a $5.2 trillion U.S. fiscal response to the COVID-19 . Romer argues that pandemic recessions are fundamentally different from ordinary recessions, and thus require different policy responses. She writes: “The unique characteristics of a pandemic recession imply that fiscal policy during a pandemic should be geared much more toward helping those who are directly harmed rather than toward increasing aggregate demand more generally. That is, it should be aimed at providing social insurance rather than broad stimulus.” While it should have increased inflation we are still waiting for the impact.
(contractionary) Monetary Policy Stagflation
The U.S. economy of the late 1970s was experiencing rising inflation and rising unemployment. This phenomenon, called stagflation, was as a result of high energy prices within a recession.
They kept increasing interest rates to 21.5%.
This did not help the AD and unemployment. During this reorganization, the level of unemployment in the U.S. rose to over 10% for the first time since the Great Depression. However, the monetary policy objective of lowering inflation seemed to have been met.
Good example of central bank conflicting objectives.
UK Privitisation Case Study
- UK privisitised its railways in 1997
- Since then prices have increased by over 200% (more than inflation)
- There have also been many accidents
- However there is greater consumer choice now.
Anti monopoly regulation
Varying effectiveness of monetary policy
- China is realiant on cutting edge industries such as AI, computer hardware and mobile phones
- Thus significant investment is required to continue.
- China lowered its interest rate to just 4% in 2020
- This lead to significant growth in the next two years 8.1%
- Australia is dependant on industries such as mining and agriculture
- In 2019 the interest rate was lowered to 0.75%
- This was not effective and growth even declined (likely other factors)
China interventionist supply side policy
- USD$3.2 trillion of spending in infrastucture from 2013-2018.
- This includes development of skyscrapers, the largest high speed rail network and the longest road expressway in the world.
- Resulted in a much more efficient economy and significant growth of roughly $4 trillion.
Strucutural Unemployment Case study
- World Economic Forum (WEF) predicts that automation will displace 75 million jobs by the end of 2022
- However it will also likely create 133 million jobs
Need for retraining etc.
US Inequality Because of Growth
In 1989 the top 10% owned 67% of the wealth and in 2016 they owned 77% of the wealth in the US. While the others dropped significantly.
GDP has increased around 4x
