Nobody downloaded yet

Issues in Money, Banking & Finance - Essay Example

Comments (0) Cite this document
Summary
Japan’s unsuccessful struggle with deflation over the last twenty years has shown how costly deflation could be for any economy, especially if economic conditions at the time are unfavourable. Nishizaki et al (2014: p27) note that while price levels do decline temporarily in…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.2% of users find it useful
Issues in Money, Banking & Finance
Read TextPreview

Extract of sample "Issues in Money, Banking & Finance"

Download file to see previous pages Some of the treatments that Japan has attempted in combating deflation are fiscal expansion, reduction of interest rates, depreciating the Yen, bank restructuring, two rounds of quantitative easing, and Abenomics. However, with the exception of the last measure whose effect is yet unclear, the situation has not changed much with a continuous economic recession reflected by its balance sheet (Botman et al, 2015: p32). This paper will explore the reasons why monetary and fiscal policy measures, as well as economic restructuring measures by Japan, have failed to end the deflationary pressures on its economy.
As Japan’s consumption rate tax increased in 1997 followed by an economic recession and a deflationary spiral, Krugman (1999b: p1) stated that Japan had entered into a liquidity trap, in which the demand for currency was increasing dramatically, while resulting increases in the supply of currency failed to effect any changes in interest rates. This assertion was an extension of liquidity trap theory advanced by Keynes, where an economy’s general demand continues to decline despite a reduction of nominal interest rates to zero with production capability being higher than the general demand. Therefore, this definition would attribute Japan’s deflationary spiral to inadequate effective demand in relation to consumption and investment. Although Japan kept its interest rates low, this was still not enough to stimulate consumption and investment, while expansion of currency supply by the Bank of Japan was equally ineffective (Murota & Ono, 2012: p344).
Krugman (1999c: p1) attributes this phenomenon to the fact that the Japanese public was more likely to save due to uncertainty about the country’s economic future, as well as fears that their income would reduce, despite having stable liquidity preference at the interest rates critical point. Therefore, the underlying factor driving this ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Issues in Money, Banking & Finance Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
Issues in Money, Banking & Finance Essay Example | Topics and Well Written Essays - 2000 words. Retrieved from https://studentshare.org/macro-microeconomics/1691841-issues-in-money-banking-finance
(Issues in Money, Banking & Finance Essay Example | Topics and Well Written Essays - 2000 Words)
Issues in Money, Banking & Finance Essay Example | Topics and Well Written Essays - 2000 Words. https://studentshare.org/macro-microeconomics/1691841-issues-in-money-banking-finance.
“Issues in Money, Banking & Finance Essay Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/macro-microeconomics/1691841-issues-in-money-banking-finance.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Issues in Money, Banking & Finance

Money and banking

...of the government charters, banks can take part in a host of federal programs, which is not applicable to regular companies like Apple and McDonald’s. For example, the Federal Deposit Insurance Corp guarantees bank deposits. That is like the government giving a free lifetime guarantee on your iPod, a situation that does not occur in the private sector (Hudgins & Rose, 2012). Federal Reserves can lend money to banks, yet banks can assume the arrears of shareholders on a levy-free basis. They can repurchase stock, issue stock, and do everything more easily than any average corporation can. Further, the government is permitted its rights as...
6 Pages(1500 words)Book Report/Review

Money,Banking&Finance

...? Money, Banking & Finance Contents Contents 2 Introduction 3 Interest Rates 3 Yield Curve 4 Risk and Its effects 6 Pure Expectation Hypothesis 7 Liquidity preference theory 8 Preferred Habitat Hypothesis 8 Conclusion 9 References 10 Introduction Rates of interest are considered to be the price that is paid for a period of time for the usage of a sum of money. Thus, for the determination of the value of a bond for a period of time, the rate of interest is a useful metric that would help in determination of the present value and the future value of the bond. Interest rate is generally determined from the market rates which would be captured in the valuation of a long term...
7 Pages(1750 words)Essay

Money & Banking

...Money and Banking The purpose of this study is to bring to light the mechanism of an economy and banking system. The study focuses on subprime crisis that has hit the US in the last two years. The study throws some light on the adverse effects of the crisis on the US as well as other economies of the world. The study also mentions the recent shut down and take-over of Lehman Brothers and also the problems faced by AIG to borrow money. Literature Review One of the most important responsibilities for the Fed is that of ensuring monetary stability in the economy, which can be achieved through a combination of stable prices of goods and services across the...
9 Pages(2250 words)Essay

Banking finance

..., consolidation and competition in Latin American banking markets. Journal of Banking & Finance, Volume 31, Issue 3, pp. 629-639 This study examines the competitive conditions in the banking industries of eleven Latin American countries for the period 1993–2000. For these countries, the time interval under examination corresponds to an era characterized by substantial reforms to restructure their banking systems, increased consolidation and foreign bank penetration. The banks in our sample are found to be earning their revenues as if operating under monopolistic competition, as in many other developed and...
10 Pages(2500 words)Essay

Money & Banking

... Money and Banking Unemployment rate in the U.S under s actual unemployment. Explain why the unemployment rate is inaccurate. The unemployment rate is a term that defines the measured proportion of civilian labor force over the age of 16 years that is not engaged in any relevant productive activities though in the process of actively seeking employment. In America, the official unemployment rate is calculated, estimated and reported each month by the Bureau of Labor Statistics (BLS), that operates under the US Department of Labor using data gathered from the Current Population Survey. The Bureau of Labor Statistics estimates unemployment, employment and labor force of over 200 million in a dynamic, complex economy... ). The role of the...
3 Pages(750 words)Assignment

Money & Banking

...LIQUIDITY PROVISION AND INTEREST RATE RISK By Lecturer Exeter fish vs. McExe Since Chef X is risk free and he is earning from flaunting the business idea. Consider that; Chef X wants Exeter fish as the name of the restaurant specializing on fish. Chef X will get; 80 x = 53.33 for the probability And 38 x = 12.67 for the probability Totaling to 66.0 In this instance bank Y will get; 60 x = 40 for the probability And 0 x = 0 for the probability Totaling to 40 The total earning for the bank will be; 40 – 40 = 0, due to the loan that they had advanced Chef X in exchange of partnership. The total earning will be 66 + 0 = 66 The local bank Y wants to...
4 Pages(1000 words)Assignment

Money & Banking

...Money & Banking Response Money Trap” Situation The Central Bank or the Federal Reserve has a duty of maintaining inflation rates close to 0 % and nominal interest rates at or near 0 % (Krugman 1). However, during global economic recessions and fundamental economic growth, the Central Bank or the Federal Reserve struggles to maintain these rates. During this period, both the consumers and commercial banks are afraid of the future and consumers opt for precautionary savings instead of spending while commercial banks lose the interest to lend money. This leads to a “Money Trap” situation...
2 Pages(500 words)Assignment

Money&Banking

...Money& Banking There exist various articles in macroeconomics that addresses various interesting issues concerning the effects of interest rate, banks and economic performances. The wall street journal: Fed Is Pushing and Pulling on Rates Riddle by Min Zeng is an example of such an article. The article was officially published on March 19, 2015 and provides more insight into various issues of concerning Treasury Yield Curve Rates, investors and banks perceptions. The Wall Street Journal is published in the wake of (The Federal Reserve chairwoman) Janet Yellen’s challenge of pushing short-term rates in the bond market higher. Min Zeng uses his long time experience of analysis of money market and capital to provide factual argument... analysis...
3 Pages(750 words)Book Report/Review

MONEY AND BANKING ASSIGNMENT

...Money and banking assignment Contents Question Monetary Policy 3 Question 2: International finance and the exchange rate 10 References 14 Question1: Monetary Policy I. The central banks around the world set a target interest rate to influence growth and control inflation. The interest rate target i.e. GDP growth rate and inflation rate are incumbent on the money supply of the economy. Central banks across the world such as the US Federal Reserve, European Central Bank, Bank of England, Bank of Japan, Reserve Bank of India, etc use various interest rate measures like the...
9 Pages(2250 words)Assignment

Money&Banking

...Money and Banking - After the Music Stopped, by Alan Blinder Affiliation: Introduction After the Music Stopped wasable to receive recognition and named among The Best Books of the 2013 by Michiko Kakutani and the New York Times Book Review. The author of this book, Binder, who is a master storyteller, provides one of the best books talking about the financial crisis through The Wall Street Journal. Alan S. Binder, who is an esteemed Princeton professor, also a Wall Street Journal Columnist, and having served as the vice chairman of the Federal Reserve Board under the Alan Greenspan, remains to be one of the widest and also the most clear-eyed economic thinkers. Through this masterpiece of After the Music...
3 Pages(750 words)Book Report/Review
sponsored ads
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.

Let us find you another Essay on topic Issues in Money, Banking & Finance for FREE!

Contact Us