We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Debt Crisis in the Euro-zone - Essay Example

Comments (0)
Summary
Debt Crisis in the Euro-zone Name University Debt Crisis in the Euro-zone As the year 2012 unfolds, the negative economic and fiscal metrics that plagued major emerging economies in 2011 due to the Euro-zone debt crisis, shows no sign of abating in 2012. A clear indication of this can be referred to statements given by France’s President Nicolas Sarkozy and Angela Merkel of Germany on the New Year’s Eve…
Download full paper
GRAB THE BEST PAPER
Debt Crisis in the Euro-zone
Read TextPreview

Extract of sample
Debt Crisis in the Euro-zone

Download file to see previous pages... Nations such as Greece, Ireland and Portugal, who are currently way deep recession, meet the definition of a full-blown economic depression (Schuman, 2011). The depreciation of the euro relative to the home currency will make Euro-zone exports cheaper in global markets; this as a result would increase the competitive pressure in the home country. At the same time, it was observed in the last quarter of 2011, manufacturing industry weakened from China to Europe and euro region’s debt crisis is expected to darken the outlook of the global economy. Before going any further, it would be interesting to understand why it is necessary and helpful for countries to borrow and then to accumulate debt. Foreign borrowing is seen by governments as an addition to domestic saving, this borrowing helps in connecting to an investment saving gap and thus this leads to gain quicker growth, this is usually considered as final and vital economic goal for any country. The Mundell-Fleming model amalgamates the foreign finance and trade into a macro-economic theory. The theory came into evolution in the early 1960s and was introduced by the great Canadian Economist and the winner of 1999 Nobel Price Award, Robert Mundell. He was also heavily helped and facilitated by the British economist, J. Marcus Fleming. During the time period when this theory came into existence, both these economists were a part of the research team within the famous International Monetary Fund. While carrying out their research towards the Mundell-Fleming model, they enhanced the conventional Keynesian model in to such an open economy system whereby the capital and the goods market were internationally incorporated (Hailu et al, 2011). The Mundell-Fleming model is of the view that under a flexible exchange rate management system, the fiscal policy has almost none or little effect over the final yield or output whilst the monetary system is hugely valuable. This situation shows an entire mirror image when a fixed exchange rate is adopted i.e. the fiscal policy becomes effective rather than the monetary policy. The hypothesis that international money markets are completely amalgamated plays an important role in formulating these results. One of the major suppositions that the Mundell-Fleming model makes is that the economy under consideration is an open economy whereby the financial capital has an ideal mobility. The Mundell-Fleming model and the traditional IS-LM model are similar to each other when expressing the market for goods and services. One of the differences is that the Mundell-Fleming model includes a fresh terminology for net exports; this can be portrayed with the following equation: Y = C(Y -T) + I (r) + G + NX (E) Whereby; Y= The aggregate/cumulative income C= Consumption, I= Investment G= Government purchases (Y – T)= Disposable Income r = Interest rate NX = Net Exports E= Exchange Rate According to this equation, the total aggregate income of any country is the totting up of all these different factors. The consumption factor within the equation is positively dependent upon the disposable income whilst the investments and the net exports are negatively dependent upon the real interest and exchange rates respectively (Serrano et al, n.d.). The Mundell-Fleming model provides an understanding that clearly helps in analysing the consequences of adopting ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
The Financial and sovereign debt crisis In Europe
Executive Summary Europe has experienced two interrelated crises over the past few years namely the banking crisis emanating from capital market security losses, as well as homegrown boom-bust problems and the sovereign-debt crisis that was caused by recession experienced in the region.
10 Pages(2500 words)Essay
The Euro Debt Crisis and Consequences for the Developing Nations
Just as the world economy was showing some signs of recovery from the worst recession in nearly a century, the global economy once again got hit by the Euro debt crisis. Even with austerity measures in place, growth prospects within the Euro zone has been downgraded to 1.5 percent this year.
3 Pages(750 words)Essay
What Were The Main Causes of The Eurozone Debt Crisis of 2010/2011, and What Have Been The Significant Policy Responses To That Crisis
What Were The Main Causes of The Eurozone Debt Crisis of 2010/2011, and What Have Been The Significant Policy Responses To That Crisis? The conception of debt crisis can fundamentally be defined as a massive public debt that is not repayable by any particular nation or a national government and ultimately seeks for financial aid from other countries or any financial institutions (Pescatori and Sy 2004).
9 Pages(2250 words)Essay
The Sovereign Debt Crisis in the Euro Region
There was an agreement that had been signed by all the European countries that said that all of them would have to limit their spending and also reduce their funding of new business and existing markets through debt. For this purpose they created an enormous pool of money, and the countries used to draw from them.
5 Pages(1250 words)Essay
Critical Review-EU Sovereign Debt Crisis
From $36 trillion in 2000, the income from the fixed income securities rose to around $70 trillion in 2007. The funds offered lucrative returns which were even higher than the US treasury bonds in the global financial markets. Due to the high turnover of the fixed income securities in the global financial markets, the lenders overlooked the government regulation in order to tap the exorbitantly high returns from the investments and the borrowers flowed in excessively to avail such loans that did not demand adherence of strict credit parameters.
3 Pages(750 words)Essay
Why did the global financial system meltdown in 2008
Why did the global financial system meltdown in 2008? The global financial system meltdown happened as an effect of the spread of the financial crisis that occurred in the US due to losses in the subprime housing markets. The losses in the subprime markets occurred as a result of aggressive investment in housing properties with lending activities undertaken without due diligence on the credit policies.
11 Pages(2750 words)Essay
Britain and the Euro Zone
A great debate has ensued regarding whether or not Britain (and its two counterparts) should join the Euro Zone. The paper will discuss this subject
4 Pages(1000 words)Essay
Topic Analysis - European Financial Crises
What has been witnessed is a huge depreciation of public and private funds as well as reduced credibility of currencies such as the Euro among the members of the European economic bloc. Economic integration, particularly in Europe, has been faulted as one of
9 Pages(2250 words)Essay
The Euro Zone Economic Crisis
Many nations within the Euro Zone have gotten themselves into a situation in which they cannot pay their debts without the assistance of other nations and organizations such as the IMF and the European Central Bank. The crisis has seen affected nation experience slow economic growth, deflation, a reduced competitiveness in the global market. 
3 Pages(750 words)Article
Critically analyse how the government debt problems initially faced by a few relatively small economies could trigger such a wide impact in financial markets
All the different countries and their financial markets are linked to each other in the current global scenario. The exposure of the financial markets of different countries to each other
8 Pages(2000 words)Essay
Let us find you another Essay on topic Debt Crisis in the Euro-zone for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us