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The Political Characteristic of the Declining Economy - Assignment Example

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The author of the paper "The Political Characteristic of the Declining Economy" will begin with the statement that the shifting of the Eurozone economy is accustomed to a very unstable economic situation and this has been aided by pressure shifting from one level to the other…
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The Political Characteristic of the Declining Economy
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?SOURCE ARTICLE: FINANCIAL EXPRESS: http www.nytimes.com 08/15/business/global/daily-euro-zone-watch.html?_r ref=business THE POLITICAL CHARACTERISTIC OF THE DECLINING ECONOMY 1.0 Introduction The shifting of the Eurozone economy is accustomed to very unstable economic situation and this has been aided by pressure shifting from one level to the other. The derived article from the New York Times provides an inconclusive approach to the worsening economic crisis, fueled by the weakening of the Euro. The analysis provides an in-depth discussion of the current economic platform. The first paragraph provides the amount of recession that was suffered by many countries in the Eurozone from the early 2012 and the significant consequences thereafter. The paragraph provides an insight into the financial crisis, aiding us to establish the link between the European Union leaders and the currency factor. The intermittency factor that crossly explored the market trends from April 2012 onwards was based on the actual GDP within the Euro as explored by eurostat, which is the agency providing relevant statistics about the fluctuations of the euro. The immediate analysis provides the financial stress, explained by the fell in the overall GDP by up to 0.2% (April statistics). This inconclusively provided further weakening of the currency and the previous quarters had recorded a 0% growth rate. The intermediate concept aiding growth according to the article (par 3) is by cutting expenditures. Financial policies were hence initiated in order to help created a stronger economic variance and this also included providing support through bailout and related financial models. The statistical analysis also points out the monetary balances and asset adequacies within the zone. This continually reflected changing exchange rate scenarios as per the critical understanding of the regulatory factor. While reforms within the various financial sectors have included examining the changing trends within the policies in the eurozone, (Germany for example demonstrated weak currency at the close of the 1st quarter), full compliance in terms of political policies by individual countries appeared real (Par 4). Source: Eurozone The economy of the Euro zone contracted but with technical avoidance of recession. The eurostat data showed the its GDP remained at bar during the 1st quarter of 2012. However the contraction was at 0.3% during the first quarters of 2011. However, the weakeness of the euro led to shrinking and to a fall by 05% in 2012. According to Willman (2007), the statistical analysis of vast financial ratings reflect a continuously varying seller-buyer trading preferences that are naturally controlled by the nature of the exchange rates. However, the exchange rates explored in part 5 of the essay show those projections relative to quantitative easing practices. Literally, the dynamics explores that the currency itself would dynamically change from one level to another, inflicting a lot of price hike within the zone. Ultimately, the scenario would hence explore vital market exchanges, and fully controlling the spending within countries. The foreign exchange market was low (par 5) partly due to financial crisis and also due to general slow growth. The purchasing characteristic identified in par 5 slowed tremendously and this also indicated that the various occurrences such as the depreciation of the currency would hence be critically considered. Source: Eurozone The industrial production in the Eurozone contracted to about 0.6% by June. This shows a slum but though the indexed analysis provides a universal relevance of the shrinking, it also provides a reflection of the major drag factors. Par 6 provides a discussion on basic foreign exchange within the zone and the potentialities of foreign exchanges. Further research also identifies notable inclusion of market structures, and the changing restrictions on competition and on other capital requirements. The core framework also explored the relevance of politics as outlined by Allan, (2003). The relevance of the exchange rate on emerging banking transactions as well on the foreign exchange in the financial markets display a rising trend in the overall financial planning among major financial players. Question 2: (a) Income Gap Financial institutions are managed ideally through relevant processes. To achieve specific targets, the economic variances are fully explored and taken into consideration. In this analysis, the rate sensitive assets are securities which have a lifespan of below one year ($20 million), the variable rate CDs ($50 million) totaling $70 million. However the assets that are fixed rate assets have their interest not reprised at the period under 1 year and hence they are also based on rate-sensitive factor. From this we can now explain that some percentage would be reprised (10%) Hence: $20 million x 10% - 2 million (rate sensitive). This is added then to the rate sensitive asset and hence $20 million + $2 million = $22 million. The rate sensitive liabilities are: $50 million and reprisals (10%) would yield $50 million + $5 million $55 million The gap is hence calculated as: GAP = RSA – RSL ……1 RSA = Rate sensitive asset The RSA in the above calculation = $22 million - $55 million = - $33 million + $10 million (Equity capital) = the GAP = -$23 million The profits would increase significantly if interest rate falls (b) By converting $ 5 million into rate sensitive asset This from the above calculation becomes: GAP = RSA – RSL ……1 $20 million + $5 million = $25 million, and deriving from the previous calculation, $25 million + $2.5 million = $27.5 million, and $27.5 million - $55 million = -$27.5 million, (-$10 million) = $-17.5 million The interest rate risk is significantly reduces. (c) Interest rate When the interest rate rises, then it means that the liability loses value as compared to the assets and this significantly increases the overall value of the organization’s equity. 3. Insurance and moral hazard control i. Curtailing specific assets is an important point of reference within which insurance companies apply in order to help establish a common point for its clients. Ultimately, the critical aspect of the company is to provide specific understanding of the market structures and their relevance. ii. Creating relevant orientations for clients- There are key market perceptions that demonstrate the modes that marketers look up to when engaging in the transactions. Ideally, according to Anna & Mauer (2007), the critical aspect of a banking sector is to manage the yields of the speculative markets. The foreign currency fluctuations are detrimentally competitive in specific evaluation standards. iii. As discussed by Allan (2003) the political implications of trade improves the competitiveness among countries. In a broader landscape, the international trade allows a comprehensive conversion of currency in conformation with the international standards and this according to Martin (2003) demonstrates clearly the facilitation of borrowed currencies which have largely low yields. The anchor of currency strengths in the market is averagely associated with the aspects of exchanges of specific currencies that have market values. iv. The banking sectors have legislative potencies that give them the ability to flexibly manage major inflow outflow stabilization. This in itself, Daniel (1999) reveals major banking strategies that can be adopted when a bank is in a fluctuation crisis as exposed by the largely variant micro-economies of scales and rising inflations reflecting certain variables that are bank dependent. Arbitrarily, the international banking scenario checks the monetary scales that officially liquidate the financial environment and demarcates the viability of the currency in relation with the emerging market. This research work will paper the relevance of exchange rate fluctuations on the banking profitability. Additionally, a complete analysis of volatility of currencies in relation to the rising market reviews would form a large discussion across the national economic platforms. 4. Increasing Bank rates –Bank of Canada The monetary policy undertaken by the Bank of Canada is carried out by targeting short-term interest rates. The major factor aiding overnight interest rates is to borrow and lend within a day, also known as overnight within them. This hence makes the bank to make a target which is relative to that rate. Optimally, this rate is a key policy rate according to the banking sector. The target is relevant and this may include making a target that would ultimately reduce inflation. Accordingly this would hence affect the credit worthiness of institutions and hence the target may be left unchanged overnight. Question 5: The Canadian banking sector requires relevant approaches to be able to meet its expectations. The financial policies that the bank scored in the last 8 years were evidenced by specific measures. These were aided at various levels by expansions in various sectors ad this banking profitability margins in the financial model are symmetrically adjusted to meet the profitability expectations as per the nature of the exchange rates (Song, 1994). This process is measured in the level of adjustment policies that demarcate the conceptual depreciation cycle of individual currencies. The stability of a financial market is phased averagely on adjustments made through additional models of enriching the exchange rates (Kasanen 1997). The perfect market adjustment potentials in the asset markets enrich the valuable increment in the uncertainties of market fluctuation detriments. The portal of exchanges support the rising volatility estimates through procedural sampling of strong currency rates. This process acts on the lower scales of managing the uncertainty caused by the growth rates of viable markets. According to Wolf (2003) the stability of the currency provides either positive or negative growth rate of an investment portal. This argument reversely measures the shocks in the analysis of fixed rates of exchange and the eventual dimensions of sustainable consequences of the assessment rates in the macroeconomic stability. In relation to the advancements of Wolfson (1997), the interests of the capital markets project particular growth rate over a more stable period of time. Time equivalence in this growth reflect the conditional factors the exhibit faster growth in the market. The tendencies of the market fluctuations are positively adjusted by the weaknesses of currencies in the trading exchanges. Perfect financial mainstream concepts are relatively monitored according to Haugen (2002). In Haugen’s view, the difficult financial environment can only be adjusted through the stabilization of the existing currency and positive feedbacks measured to an anchor of growth patterns. A more detailed look at the variability context of the micro-economic policies of trade (Kane, 1998) explains far ranging reforms in the adoption of competitive policies experienced by major trading markets. These reforms are conclusively rated as per the economic efficiency cycles and the inclusions of the elements which are market friendly. Independent market growths and the reform platforms are repeatedly deregulated in order to raise the efficiency within the market. Eagle (2003) explains the pricing element that is hugely required in adjusting the price viability ratio. There is a direct correlation, as per the volatility estimates, the models themselves provide a sustainable feedback within which the financial industry would largely exhibit. REFERENCES Manganelli, J. & Wolswijk, G.( 2007).Market discipline, financial integration and fiscal rules. The Analytical factors of the Euro, Vol. 3, pp 78-122 Boissay, F. and Gropp, R. (2007).A look into the factor model black box. Publication lags and the role of hard and soft data in forecasting, Vol. 5, pp 66-69 Lamo, A. & Perez, J. (2007).The cyclicality of consumption. Wages and employment of the public sector in the euro area, Vol.7, pp 49 Bartram, S.(1999).Corporate Risk Management. Uhlenbruch, Bad Soden. Bodnar, M., & Gebhardt, G.,(1999).Derivatives Usage in Risk Management by U.S. and German Non-Financial Firms: A Comparative Survey, Journal of International Financial Management and Accounting, Vol. 10 (3), 153-187. Booth, J.,(1995).Expectations, Interest Rates, and Commercial Bank Stocks. Journal of Financial Research, Vol. 8 (1), 51-58. Campbell, Y.,(1997).Stock Returns and the Term Structure. Journal of Financial Economics, Vol. 18 (2), 373-399 Chen, C., & Chan, A.,(1999).Interest Rate Sensitivity, Asymmetry, and the Stock Returns of Financial Institutions. Financial Review, Vol. 24 (3), 457-473 Mansur, I., (1998).Sensitivity of the Bank Stock Returns Distribution to Changes in the Level and Volatility of Interest Rate: A GARCH-M Model. Journal of Banking and Finance, Vol. 22 (5), 535-563. Engle, R. (1993). Measuring and Testing the Impact of News on Volatility. Journal of Finance, Vol. 48 (5), 1749-1779 Fama, E..,(1990). Stock Returns, Expected Returns, and Real Activity. Journal of Finance, Vol. 45 (4), 1089-1108 Read More
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