Tuesday, May 5, 2020

Macroeconomic Policy Globalization and Development

Question: Discuss about the Macroeconomic Policy for Globalization and Development. Answer: Introduction: This study would be helpful to identify the economic position of South Korea for last 40 years. In order to identify the economic position, this study would take the help of some important macroeconomic policies such as consumer price inflation, real GDP growth, unemployment rate, fiscal policy, fluctuation of the balance of payment, short term and the long term interest rate and the exchange rate in the currency market etc. Presently, it can be mentioned that South Korea is at the fourth position in terms of the measurement of size of the economy in Asia. In addition, it can be stated that South Korea is eleventh largest economy in the world. As per the statement of Weale et al. (2015), it can be added that the economy of South Korea has been rising from the poorest position. The income level of the country has also increased. According to Fagiolo and Roventini (2012), it can be mentioned that the average rate of growth of South Korea has increased by 5% and being a high income economy. In the year of 1960, the per capita gross domestic product was $79, which is lower than the other sub Saharan nations. In 1986, the gross domestic product of the manufacturing sector was accounted by the amount of 30percent. In terms of purchasing power parity, South Korea is at the 13th position in the world. Consumer price inflation According to Rapetti (2013), consumer price inflation is the key factor, which can effectively control the rate of inflation of a country. From the above figure, it can e observed that the rate of inflation has been fluctuating and from the year of 2011, the rate of inflation of the country has been decreasing. As a result, it can be mentioned that decrease in the rate of inflation of a country, the prices of that economy will be increased at a slower rate. In the words of Tomlinson (2014), it can be mentioned that is the rate of inflation is falling between the 2.5% to 1.5%, and then the aggregate demand of the country will be decreased. From the above figure, it can be observed that in the year of 2015, the rate of inflation in South Korea has been decreased below 2.5%, therefore, it can be added that the growth of the economy of South Korea has been decreased. Therefore, it can be mentioned that the rate of unemployment of the country will be decreased. This adverse relationship between the inflation rate and the unemployment rate can be discussed with the help of Phillips curve. On the contrary, it can be mentioned that South Korea has planned to maintain that the rate of inflation is at 2% from the year of 2016, therefore, it can be mentioned that several policies would be formulated by the government of the country and the bank of Korea has also tried to meet the targeted inflation rate. In addition, Forder and Menon (2013) mentioned that during the time of global financial crisis, South Korea maintained their inflation rate by 4.7% in the year of 2008. Therefore, from this trend of inflation rate of the country, South Korea has the capacity to overcome the situation and can increase the rate of inflation. Real GDP growth: The above figure depicted that the rate of GDP growth of South Korea is constant from the year of 2010. Although during the time of global financial crisis, the rate of GDP of South Korea decreased. After that, the rate of GDP of the country has increased. In the point of Patnaik and Shah (2012), the average GDP growth rate of South Korea is 1.66 percent from the year of 1970 to 2016. In addition, it can be mentioned that the rate of GDP was 6.80 percent during the first quarter of 1988. It is known that the income level of South Korea is comparatively higher. During the time of financial crisis, the economy of South Korea was suffering from the liquidity crisis. Therefore, Ilzetzki and Jin (2013) mentioned that South Korea has followed and implemented relevant economic policies, which would make an impact on the development of the economy of the country. During this time, the country took financial aids from the global monetary fund. In the present year, the private consumption of the country has explored by 0.5 percent. In this purpose, it can be mentioned that as the expenditure of durable and the non durable goods has increased, the private consumption of the economy increased. In addition, it can be added that the governmental consumption of South Korea also increased by 1.4 percent. Kendrick (2012) added that fixed investment has also increased. On the contrary, it can be mentioned that the cost of manufacturing goods has decreased by 1 percent. It is known that South Korea is famous as the export oriented nation. As a result, it can be mentioned that countrys GDP has increased by 1.1 percent on a quarter bases for the export of fuels. However, Matsumoto, Hengge and Islam (2012) argued that with the rise in the population of the country, the future growth of GDP of South Korea will be decreased. Rate of unemployment: The above figure depicted that South Korea has tried to seasonally adjust the rate of unemployment, which is decreased by 3.7 percent in the month of October, 2016. According to Eichengreen, Frieden and Hagen (2012), it can be mentioned that the rate of unemployment was decreased by 4 percent in the previous month and this rate was better compared to the market prediction. In addition, it can be mentioned that this rate of unemployment was the lowest since the month of July, 2016. On the other hand, it can be stated that the rate of unemployment in South Korea was average from the year of 1999 and the rate was 3.63 percent. The unemployment rate was lowest in the year of 2013 and the rate was 2.90 percent. As per the statement of Patnaik and Shah (2012), it can be mentioned that if the rate of unemployment of a country is lower, then it can be stated that the countrys GDP is increased. The wage rate per employee is also increased. Therefore, it can be inferred that countrys growth wi ll be increased. Although during the time of global recession, the unemployment rate of South Korea was massively decreased, however, the unemployment rate of the country has decreased. As a result, it can be concluded that the GDP growth of the country has also increased after 2008. Fluctuation in the current account of balance of payments: It can be stated that the present account balance of payments of South Korea is comparatively stable to the other Asian countries. This stability has maintained by the country after formulating several economic policies after global financial crisis. Before the financial crisis, countrys current account balance of payment fluctuated and the economy was suffering from massive drawbacks. In the point of Kendrick (2012), it can be mentioned that South Korea made a record in the current account surplus in the month of October of 2016 and the rate was 8719.30 USD Million. On the other hand, it can be added that the rate of the current balance of payment was average from 1980 to 2016. In that time, the rate was 1313.06 USD Million. Nevertheless, Weisbrot and Jorgensen (2013) criticised that this rate of current account balance of payment was the lowest in August, 2008. Volatility of short term policy interest rates and long term interest rates yield on the government bonds: From the above figure, it can be observed that South Korea 10 year rose by 0.01 percent to 2.26 from the 2.14 from the previous trading session. As opined by Eichengreen, Frieden and Hagen (2012), it can be mentioned that in the year of 2001, the Government bond of South Korea reached to 7.91 percent and this rate was the highest and this rate was lowest in the year of 2016, the rate was 1.36. On the other hand, the government bond of South Korea is concerned by the national government and also is dominated by the currency of South Korea. The government yield of South Korea needed to the investors for funding the loans, which in turn reflect the countrys inflation expectation. Stability of the exchange rate in the currency market: As per the statement of Tomlinson (2014), it can be mentioned that there are four government bodies in South Korea, which can control the countrys exchange rate. The four governmental bodies are such as Bank of South Korea, supervisory services, ministry of finance and the economy and the South Korea customs services. These governmental bodies can manage the trade under the foreign exchange performance. Rapetti (2013) added that there are free floating exchange rate activities within the country. This rate can be measured with the help of demand and supply. Countrys exchange rate was stable in 1990. Conclusion After analysing the study, it can be observed that the economy of South Korea has been growing since 40 years. Although, the performance of the economy decreased during the time of global financial economic crisis, after that the performance of the economy of South Korea has been increasing. As a result, it can be mentioned that the implementation of relevant governmental policies will be helpful for the improvement of high gross domestic product. References Donadelli, M. and Persha, L., 2014. Understanding emerging market equity risk premia: Industries, governance and macroeconomic policy uncertainty.Research in International Business and Finance,30, pp.284-309. Eichengreen, B., Frieden, J. and Hagen, J.V. eds., 2012.Monetary and fiscal policy in an integrated Europe. Springer Science Business Media. Fagiolo, G. and Roventini, A., 2012. Macroeconomic policy in DSGE and agent-based models.Revue de l'OFCE, (5), pp.67-116. Forder, J. and Menon, A. eds., 2013.European Union and National Macroeconomic Policy. Routledge. Ilzetzki, E. and Jin, K., 2013. The puzzling change in the international transmission of US macroeconomic policy shocks.unpublished, London School of Economics.2013. Kendrick, D.A., 2012.Feedback: A New Framework for Macroeconomic Policy(Vol. 10). Springer Science Business Media. Matsumoto, M., Hengge, M. and Islam, I., 2012.Tackling the youth employment crisis: A macroeconomic perspective. ILO. Patnaik, I. and Shah, A., 2012. Did the Indian capital controls work as a tool of macroeconomic policy?.IMF Economic Review,60(3), pp.439-464. Rapetti, M., 2013. Macroeconomic policy coordination in a competitive real exchange rate strategy for development.Journal of Globalization and Development,3(2), pp.1-31. Tomlinson, J., 2014.British Macroeconomic Policy Since 1940 (Routledge Revivals). Routledge. Weale, M., Blake, A., Christodoulakis, N., Meade, J.E. and Vines, D., 2015.Macroeconomic Policy: inflation, wealth and the exchange rate(Vol. 8). Routledge. Weisbrot, M. and Jorgensen, H., 2013.Macroeconomic policy advice and the Article IV consultations: A European union case study(No. 2013-03). Center for Economic and Policy Research (CEPR).

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.