Exam questions - Book Report/Review Example

Review Management By Department Review Management India globalization in 1990s Paul p. 205) cite that globalization in India in the 1990s causes the loss of monetary-policy independence in the country. India monetary-policy independence anchors the exchange-rate regime together with the nation’s foreign-exchange reserves. India follows United States interest rates starting from 1960s when the nation faces foreign-exchange constraints and maintains fixed exchange rates. From 1970s to early 1990s, India manages to exercise monetary-policy independence through a floating exchange-rate regime.

Paul (2012, p. 206) does not attribute the loss of monetary-policy independence to globalization since the early 1990s but to a stable exchange-rate policy of India that heavily resembles the 1960s policy. The author assumes globalization is responsible for the loss of monetary-policy independence in India that substantially frees the economy in the early 1990s. A fixed exchange rate ensures capital flows to equalize domestic and international interest rates. With monetary policy losing its ability to influence the domestic activity different researchers, reinforce the microeconomic policy trireme grounded on the interest rate parity.

The argument depicts the impossibility of maintaining free capital flows, an independent monetary policy, and a fixed exchange rate. India faces a dilemma between accepting free capital inflows and maintaining a stable exchange rate. The country tracks the interest rate of the leading economies to maintain capital inflows. Paul (2012, p. 206) use a two-country model to monitor monetary-policy independence and exchange rate regimes. Monetary-policy independence refers to a situation where the central bank is in-charge of monetary tools with no significant influence to the foreign counterpart.

A study of United States monetary shocks over the period 1969-1996 claims that the fed rate is the easiest indicator of Federal Reserve intensions that can deduce monetary regimes for a long time. Under the Bretton-Woods system, Indian rupee pegs to British sterling and consequently pegged to the United States dollar. India managed to float that enabled the country to achieve nominal and real exchange rate stability. Indian authorities stabilized the exchange rate immediately after the Asian crisis in June 1998.

China’s development of economy in 1970s China’s economic development makes a transition from planned economy to a market economy in the late 1970s. Lin (2013, p. 259) China’s rise is the most intriguing economic phenomenon in our time. Prior to the transition from planned to a market economy at the 70s China remains in a quagmire of poverty for many years. Lin (2013, p. 260) says that in the 70s Chinese per capita income was US$154 that is less than a third of the mean of Sub-Saharan countries.

China was an inward-looking country where its trade dependence and a ratio of 9.7 per cent. China annual GDP growth averages 9.8 percent for over 33 years. Since that time, China’s growth has an average growth rate of 16.6 percent. The country is now at an upper middle-income country with a per capita income of US$6,100 as more than 600 million citizens are above the poverty line. The country’s dependence ratio reaches 50 percent one of the highest in the world. In 2009, China overtook Japan as the world’s second-largest economy and replaces Germany as one of the world largest exporter of commodities.

The remarkable growth of Chinese economy makes the nation as a driver of world development and a stabilizing force in the world. China began its development agenda in 1949 to pursue innovation and structural transformation. In the advanced developed high-income countries engage in expensive and risky research and development. Deng Xiaoping initiated a transition in 1979 where China adopted an opening-up strategy to tap potential from the rest of the world. Additionally, China adopted series of five-year plan to accelerate the building of modern advanced industries with the goal of overtaking Britain in 10 years and United States in 15 years.

BibliographyLin, JY 2013, Demystifying the Chinese Economy, Australian Economic Review, 46(3), pp. 259-268.Paul, BP 2012, Globalization and Monetary-policy Independence in India, Journal of Developing Areas, 46(2), pp. 205-211.