Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Fear of floating wikipedia , lookup
Pensions crisis wikipedia , lookup
Full employment wikipedia , lookup
Modern Monetary Theory wikipedia , lookup
Edmund Phelps wikipedia , lookup
Non-monetary economy wikipedia , lookup
Helicopter money wikipedia , lookup
Money supply wikipedia , lookup
Business cycle wikipedia , lookup
Fiscal multiplier wikipedia , lookup
Early 1980s recession wikipedia , lookup
MACROECONOMIC POLICY Goals Tools Types of Economic Policy Efficiency of Economic Policy Economic Policy Definition: „the set of government rules and Regulations to control or stimulate the aggregate indicators of an economy“ ( http://economictimes.indiatimes.com/definition/macroeconomic-policy ) Areas covered taxation, government budget, interest rates, labour market, national ownership and others Policy is directed to achieve particular goals target inflation Example of Czech goals: unemployment economic growth Inflation target: 2% (CNB, 2015) … Employment target: 75% for people between 20 – 64 years (government, objective to 2020) Tools -> Expenditures on research: 1% of GDP (government, objective to 2020) MACROECONOMIC POLICY MONETARY POLICY Government spending and taxation FISCAL POLICY Changes in money supply Monetary Policy Monetary policy is the government or central bank process of managing market economy. It involves operations with money, interests, loans etc. Governmental authorities can use direct and indirect instruments: Direct instruments Regulation of investment loans (to obtain a loan of extent exceeding level given by government an applicant has to submit to the bank approval from state authority) Regulation of consumption loans (e.g. state-defined maximum maturity for loans) Other direct instruments (e.g. loan ceilings) Monetary Policy Indirect instruments Policy of minimum required reserves (central bank sets liability for commercial banks to store a portion of their assets on a non-interest account in a central bank) Free market operations (are the means of implementing monetary policy by which a central bank controls its national money supply by buying and selling government securities, or other instruments) Discount rate policy (discount rate is an interest rate on excess liquidity stored by commercial banks with the CNB) ECB Deposit Facility interest rate (= discount rate) … - 0.4% (Effective from 16 March 2016) CZ discount rate history 1.1.1990 1.4.1990 1.10.1990 11.11.1990 1.1.1991 8. 9.1991 25.3.1992 26.8.1992 30.12.1992 10.6.1993 24.10.1994 26.6.1995 21.6.1996 27.5.1997 14.8.1998 27.10.1998 23.12.1998 12.3.1999 3.9.1999 27.10.1999 23.2.2001 27.7.2001 30.11.2001 22.1.2002 1.2.2002 26.4.2002 4,00 5,00 7,00 8,50 10,00 9,50 9,00 8,00 9,50 8,00 8,50 9,50 10,50 13,00 11,50 10,0 7,50 6,00 5,50 5,00 4,00 4,25 3,75 3,50 3,25 2,75 26.7.2002 1.11.2002 31.1.2003 26.6.2003 1.8.2003 25.6.2004 27.8.2004 28.1.2005 1.4.2005 29.4.2005 31.10.2005 28.7.2006 29.9.2006 1.6.2007 27.7.2007 31.8.2007 30.11.2007 8.2.2008 8.8.2008 7.11.2008 18.12.2008 6.2.2009 11.5.2009 7.8.2009 1.10.2012 2.11.2012 2,00 1,75 1,50 1,25 1,00 1,25 1,50 1,25 1,00 0,75 1,00 1,25 1,50 1,75 2,00 2,25 2,50 2,75 2,50 1,75 1,25 0,75 0,50 0,25 0,10 0,05 Types of Monetary Policy Monetary policy performed by central bank can be Expansive policy when money supply is raised by reduction of discount rate, purchase of securities etc. Cutback policy when money supply is reduced (augmentation of discount rate) Fiscal Policy Fiscal policy actions of a government setting the level of public expenditure how that expenditure is funded influences government budget Income side Expenditure side Fiscal Policy Income side (Revenues): is formed mainly by taxes. Tax is a financial charge or other levy imposed on an individual or a legal entity by a state. Tax system usually consists of: Direct taxes are ones paid directly to the government by the persons (legal or natural) on whom it is imposed: in CZ income tax, road tax, real estate tax, real estate transfer tax Indirect taxes are ones which are collected by intermediaries who turn over the proceeds to the government and file the related tax return: in CZ value added tax (VAT), consumer tax (alcohol etc.), ecological tax Other revenues are various customs and administrative fees Expenditure side (Expenses): Purchases of goods and services (for national defense, government administration, education system etc.) Transfer payments (are payments of money from a government to an individual for which no good or service is required in return; e.g. unemployment benefit) Types of Fiscal Policy Expansionary fiscal policy - an increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output. Contractionary fiscal policy - a decrease in government purchases of goods and services, an increase in net taxes, or some combination of the two for the purpose of decreasing aggregate demand and thus controlling inflation. Neutral fiscal policy - Modest fiscal policy. Generally not a common stance to take as there is no intention of affecting economic activity - this is rare, especially in contemporary times. If revenues > expenses → surplus of national budget If revenues < expenses → deficit of national budget External Commerce and Monetary Policy External commerce and monetary policy regulates flows of goods, services and capital that cross the country borders each movement of goods, services and capital is reflected in country’s balance of payments. A long-term equilibrium of balance of payments is one of conditions that qualifies fulfilment of final goals of stabilization policy. The change of exchange rate can influence the balance of payments. Employment and Income Policy Source: Národní program reforem České republiky 2012 Types of Economic Policy Keynes’s theory Keynesians require fast response of government to economy development and active correcting of economy failures fiscal policy Neoclassical theory is based on the stimulation of aggregate supply main condition of market mechanism operation is price stability monetary policy Neokeynes’s theory Neokeynes’s theory is developed from Keynes’s theory. Neokeynesians want to realize their economic policy as a suitable combination of monetary and fiscal policy. Efficiency of Economic Policy Generally, there are four basic goals of economic policy: 1. Sufficient rate of unemployment 2. Stability of price level 3. Sufficient rate of real output growth 4. Long-term equilibrium of balance of payments These goals are conflicting. Fulfillment of one goal (unemployment reduction) is in conflict with other goal (price level stability). Efficiency of economic policy can be measured e.g. by: Magic tetragon Philips curve Magic Tetragon This controversy of mentioned four goals is described with “magic tetragon”. To represent graphically the efficiency of economic policy so called diamonds are used. The shape of diamond expresses efficiency of governmental policy on individual fields; as more far away is vertex from an intersection point of x and y, than the government was more successful in carrying the relevant goal. The size of diamond’s area indicates total efficiency of stabilization policy. The grater the area is, the more successful the policy was. Magic Tetragon G - average yearly rate of real production growth U - average yearly rate of unemployment I (P) - average yearly inflation rate B - average portion of balance of payments on current account as a part of national output in % Philips Curve This analysis is related to the name of economist A.W.Philips, author of Philips curve. The Phillips curve is a historical inverse relation and tradeoff between the rate of unemployment and the rate of inflation in an economy. Stated simply, the lower the unemployment in an economy, the higher the rate of change in wages paid to labor in that economy. Drop of unemployment results in price level augmentation; lowering inflation leads to higher unemployment. The government has to decide between keeping high employment and the cost of high inflation or having stable prices but high unemployment. Government can influence the rate of unemployment and rate of inflation. These can be done e.g. by convincing employers and unions to reduce growth rate of prices and wages. Philips Curve Records related to CZ Inflation 12/2007 … 5,4% 12/2014 … 0,1% Unemployment 12/2007 … 6,0% 12/2014 … 7,5% Resume Economic policy – goals & tools Monetary – money, interests, loans Fiscal – budget External Commerce and Monetary Policy – int. trade Income and Employment policies – wages, labour market Efficiency Magic tetragon Philip’s curve