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
Pensions crisis wikipedia , lookup
Real bills doctrine wikipedia , lookup
Full employment wikipedia , lookup
Okishio's theorem wikipedia , lookup
Fear of floating wikipedia , lookup
Exchange rate wikipedia , lookup
Money supply wikipedia , lookup
Nominal rigidity wikipedia , lookup
Monetary policy wikipedia , lookup
Early 1980s recession wikipedia , lookup
Phillips curve wikipedia , lookup
Stagflation wikipedia , lookup
Inflation and Deflation in Hong Kong in the past ten years Group1 Lau Hon Wa(Group Leader) (053034) Ng Kwun Hwa(053033) Chau Kwok On(053038) Luk Juvenia(053049) Shiu Cheuk Pan(053063) Reasons of Inflation 1. Demand Pull Inflation 2. Cost Pull Inflation The reasons for the inflation in HK from 1990-1997 Structural transformation key relocation of HK manufacturing activities to China led to a significant increase in business opportunities for HK The reasons for the inflation in HK from 1990-1997 Imported inflation It has been argued that HK suffers from imported inflation due to the Linked Exchange Rate System. The reasons for the inflation in HK from 1990-1997 Housing Costs when there is an inflation, people forecast the housing price will be increased in the future pushes up the property price and the rental price as well. The reasons for the inflation in HK from 1990-1997 Growth in government spending Government expenditure was grew in the 80s, it increased the expenditure in the public sector, thus the inflation existed. Ways to curb inflation 1. To raise the interest rate 1.1 public save more money public have less current money purchasing power decreases price falls 1.2 expenses when borrowing money will increase purchasing power decreases price falls Ways to curb inflation 2. To increase the income tax public’s expenses increase their burden increases they will spend less quantity demanded decreases price will decrease S P1 P2 D1 D2 Ways to curb inflation 3. To decrease the sales tax decrease the cost of goods the supplies can set the price lower price lower S1 S2 P1 P2 D Ways to curb inflation 4. To issue government bonds the current cash in the public’s hand will decrease the public can buy less quantity demanded will decrease price falls The factor of deflation in the world: 1. Most of the countries in the world have done many works on combating inflation and they are success. 2. Technology improves quickly 3. We can find the information about the equilibrium price of the world easier and also find more substitutes. 20 % 10 0 -10 1996 1997 1998 1999 2000 2001 -20 year private consumption domestic capital formation government consumption GDP in Hong Kong is made up of 60%C 30% I 10% G decrease of the aggregate demand inadequate money supply imported deflation Decrease in aggregate demand comprises three parts. The burst of asset bubbles shrink of stock market labour market Imported deflation import goods price level index import goods price level index 2000=100(base year) 110 105 100 95 90 85 1997 1998 1999year2000 2001 2002 the nominal rate of interest was at a lower level. The reduced money supply increased the real rate of interest so we have deflation. Nominal rate of interest = real rate of interest + Anticipated inflation rate measures to combat deflation: 1. decrease the interest rate by purchasing government bonds R decrease => I increase => Y increase 2.A well-timed tax cut increase the disposal incomes increase in consumption 3.High government spending production of the economy would be boosted relieve the unemployment 4.structural reforms increasing flexibility in factor markets facilitate the reallocation of resources allow for a more rapid disposal of bad assets 5. Measures aimed at promoting deeper and more liquid capital markets. case of Hong Kong: 1. Individual Visit Scheme boosted retail, tourists and restaurant industries and the turnover of consumer durables and luxury goods such as electric appliances, cosmetics, watches, gold and jewelry and etc. 2. The quick reversal of deflation to inflation in the Mainland poor harvest and grain price increase as well as the shortage of certain raw materials Since September of 2005, the CPI of China substantially increase inflation mainly driven by grain price increase in the Mainland =>price increases in certain good in Hong Kong 3. steady softening of the US dollar and resultant prices increase of the imported goods Beginning in 2001, Hong Kong dollar index has been plunging along with depreciation of the US dollar from 138.9 in 2001 to 98.9 at present, dropping by 28.7% =>slowed the declining trend of Hong Kong’s general price level Composite Consumer Price Index 110.0 107.5 104.5 105.0 CPI 99.4 98.8 100.0 95.0 103.2 97.8 94.8 92.9 92.4 92.0 93.0 90.0 85.0 80.0 1995 1996 1997 1998 1999 2000 2001 Year(s) 2002 2003 2004 2005 Composite Consumer Price Index Composite CPI yearly change percentage +10.0 +8.0 Groth rate +6.0 +4.0 +2.0 0.0 -2.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 -4.0 -6.0 Year(s) Composite Consumer Price Index Groth rate Change in Inflation rate VS change in GDP at constant market prices (2000) 12 10 8 6 4 2 0 -2 -4 -6 -8 1995 1996 1997 1998 1999 2000 Year(s) 2001 2002 2003 2004 2005 Inflation groth rate GDP groth rate Change in inflation rate VS change in umemployment groth rate 10 8 Groth rate 6 4 2 0 -2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 -4 -6 Year(s) Inflation groth rate umemployment groth rate Change in inflation rate VS change in the best lending rate 12 10 Groth rate 8 6 4 2 0 -2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 -4 -6 Year(s) Inflation rates the best lending rate THE END