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Friday, February 22, 2019

Macroeconomics in US

US Economy is a mixed scrimping where the private sector plays a major role in scotch natural process and the role of government is minimal compared to other industrialise countries wish considerably spectacular Britain, Germ some(prenominal), France, Spain, Netherlands, Scandinavian Countries and East European countries.However after the Great low in1930s the government at l eastern United States utilise fiscal and fiscal constitution to achieve the macrostinting objectives of full-employment, expenditure stability outer balance and non- pompousnessary frugal growth. However the reliance on the above macroeconomic policy varied from one administration to the next after realness war II as swell the orientation towards fiscal and financial policy to control or stabilize the economy or in other words in that location is controversy among economist whether the fiscal and financial policy will actuall(a)y work in practice and to the utmost to its dominance in stabili zing the economy or whether these policies whitethorn be counter productive to the securities industry economies and the causes of economic cycles and explanation of the causes of the great depression at least(prenominal) among US economist or among economist in general.However even with these controversies and differing perspectives how the economic variables relate and the differing confidence of market mechanisms to decrease to equilibrium at full employment if the market is allowed to work without any intervenence the fiscal authorities intervene in the economy to fabricate market failure and other externalities or for some political and welfare reasons.In this context of use it is necessary to consider the effectiveness of these policies in the context of empirical evidence and give imputableconsideration of the structural or institutional framework and the market conditions specially the labor market conditions in US in goods markets as well as in the financial mar ket structure and workings within the context of global economic interdependencies between economies in the contemporary economic climate as well as how the agents react or form expectation roughly inflation as well as the political imperatives influencing policy orientation in US.In macroeconomic policy development in the context of the US political institutional structure and political process as well as the probability of economic shocks and political shocks in other part and how these affects the occurrence of volatility in economic performance and the current concerns of environmental issues and the cost and benefits and the disturb of regulation on the take aim of economic activity and the position of economic growth fluctuation and its predictability or uncertainty in themecasting economic outlook for short, medium bourne .As well the cost of oil and the political instability in the middle east and how the energy issue is addressed in US by the market mechanism will d efinitely affect the economic performance in a macroeconomic perspective for US in the proximo and the splendour or other wise of macroeconomic policies or the status of macroeconomics in general as opposed to neoclassical economics or littleeconomics launching or neoclassical monetarist perspectives and less(prenominal)(prenominal) preference to fiscal policies and micro economic domesticise or supply-side economics and minimal interference by government in the market operation.The effectiveness of Fiscal and Monetary policy in US In context of US economic system and the tractability of markets to responds to changes in demand and supply and other economic information particularly the labor market tractableness in the US compared to other industrialized countries and historically less preference of economic agents for government to be interfere in the market and in its political institutions suggests that rational expectation theory whitethorn be mostly applicable to US and there fore the effectiveness of Fiscal and monetary policy may be less effective in US compared to other industrialized countries and microeconomic reform polices and neoclassical monetary theory may be most applicable in the US context.However the expectation formation in existence is not completely rational and adaptation may also be not rational completely and there fore at least in short term monetary policy may be effective in controlling the rate of inflation in the context of US economy and keep the inflation target at optimum direct. In practice the monetary and fiscal policy has magazine lag to work in practice and there fore if they are used to stabilize the economy because of the time lag it takes to work it may annex the cyclical boom bust pattern of economic development and there fore loose its credibility particularly the discretionary fiscal and monetary policy in reducing unemployment or controlling inflation.Or it may be achieving low unemployment at a very am ply rate of inflation or low inflation at a gamey level ofunemployment in the short term and in long term the economy will live on towards the original level because of the market incorporates all expectation rationally and moves tothe non-accelerated Inflation rate of unemployment (NAIRU) as well flexibility in the labor market to a greater extent because of less stringent regulation of labor market in US compared to place for example Germany or other advanced European economies.However fiscal, and monetary policy has worked in short term in context of high unemployment at least after the great depression for some time in the 1990s and still has a role to play at least to control inflation and response to inflationary shocks by monetary policy. In summary given the empirical evidence and the market characteristics of US and the Institutional frame work politically and socially the macroeconomic polices effectiveness suggests in practice to be less effective in US context.Conclu sionAs discussed above in US Macroeconomics is considered at least in terms of its usefulness to some extent achieve its macroeconomic objectives. However the effectiveness of such policies and the controversy among economists in regards to trade despatch between economic variables and its relationships in US context reduces its importance and move towards to microeconomic foundations of Says Low or neo macroeconomic foundations and far from Keynesian Economics of fiscal policy particularly the discretionary fiscal policy and deficit financing to reduce unemployment because of market failure.This to some extent overdue to Friedman monetary revolution in US andcased doubt about the inflationary outcomes of fiscal policy and crowding out effect and its impact on interest rat and its effect on investment level and there fore not increasing output and employment level but on prices. In addition as discussed above due to the political institutional structure and expectation formation i n US the macroeconomicfoundations are contentious in US.In addition the flexibility of labor market and other markets in US suggests that market may work in an opposite direction to nullify the impact of these policies on macro economic variables such as employment level and inflation and increases the adoption of microeconomic reform and supply-side economics to address economic growth, unemployment, price stability and external balance rather than only relying on macroeconomic policies and macroeconomic theories which has many controversies and diverse policy prescriptions to address any macroeconomic objective and the trade-off between these objectives and the relationships between economic variables.Given the macroeconomic knowledge how an economy works is incomplete and its predicts are far from certain. in that location foe given the arguments and the discussion it can be said macroeconomics in US has a role to play in formulating polices in the future however given the pract ical issues of macroeconomic policy effectiveness micro foundations of economy may become important in the future in context of US market conditions and flexibility as well as how expectations are formed and adaptations of expectations in practice and political institutional and political orientation towards a free market perspective.BibliographyBrayton. F, Mauskpf. E, Reifschneider. D, Tinsley. P, Williams. J. (1997). The Role of Expectations in FRB/US macroeconomic model. Federal Reserve Bulletin. Retrieved March, 2, 2007, from http//findarticles.com/p/articles/mi_m4126/is_n4_v83/ai_19405190Federal Reserve situate of San Francisco. (1997). What is the Optimal Rate of Inflation?. Federal Reserve Bank of San Francisco. Reteived marchland 2, 2007, from http//www.frbsf.org/econrsrch/wklyltr/el97-27.htmlFiscal and monetary policy comparisons (n.d). Retrieved March 2, 2007, from http//www.tutor2u.net/economics/content/topics/fiscalpolicy/fiscal_monetary_comparison.htmPalley. T. (1998) . zip fastener is not the Optimal rate of Inflation. Challenge, 41, 1, Retrieved March 2, 2007, from http//www.questia.com/PM.qst?a=o&d=5001329648Roach.S. (2006). Global economy, Chinese economic policy, US hosing slump, Money Week. Retrieved March 2, 2007, from http//www.moneyweek.com/ charge/21503/the-two-key-issues-facing-the-global-economy.html

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