Recent orders
Mortality and Standardization
DEMOGRAPHY
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A.1. Fertility Measures
Age (x) Bangladesh (2010) Japan (2010)
ASFR (per 1000) Female Pop. ASFR (per 1000) Female Pop.
15-19 118.2 8,180,000 5.4 2,963,000
20-24 153.3 7,434,000 39.6 3,315,000
25-29 106.7 6,719,000 91.4 3,833,000
30-34 56.2 6,269,000 93.2 4,247,000
35-39 21.8 5,565,000 39.3 4,828,000
40-44 6.1 4,335,000 6.2 4,265,000
45-49 3.0 4,032,000 0.1 3,914,000
For each of female population (i.e. in Bangladesh and in Japan) calculate:
The Total Fertility Rate (TFR) in 2010.
Bangladeshi
TFR= 5x sum (ASAFRx)
=5 x (118.2+153.3+106.7+56.2+21.8+6.1+3.0)
=2326.5 per 1000 women or 2.3265 per woman
Japan
TFR= 5x sum (ASAFRx)
=5x (5.4+39.6+91.4+93.2+39.3+6.2+0.1)
=1376 per 1000 women or 1.376 per woman
The General Fertility Rate (GFR) in 2010.
General Fertility Rate is the birth rate of women of child bearing age (15-44)
= (Total birth/ no. Of women aged 15-44) x 1000
Based on cumulative frequency, GFR of Bangladesh = (42,534,000/38,502,000) x 1000
=1104.721
For Japan= (27,365,000/23,451,000)1000
=1166.901
The Gross Reproduction Rate (GRR) in 2010, assuming the sex ratio at birth is 104 for Bangladeshi population and 106 for Japanese population.
For the Bangladeshi, GRR in 2010, = TFR x 100/ (100+ SR)
= 2.3265 x 100/ (100+ 104)
=1.140
For Japan, GRR in 2010, = TFR x 100/ (100+ SR)
=1.376 x 100/ (100+ 106)
=0.0668
d. The Net Reproduction Rate (NRR) in 2010, assuming that female mortality for both populations is described by the 2010 life tables for each country. Selected values from the Tx column of the two life tables are presented in the table below (l0 = 100,000).
(Note: Use 3 dcp. for TFR, GFR, GRR and NRR).
Age (x) Bangladeshi female Japanese female
5Lx Tx 5Lx Tx
15 455,185 5,380,375 497,965 7,132,329
20 452,440 4,925,190 497,427 6,634,364
25 449,475 4,472,750 496,765 6,136,937
30 445,740 4,023,275 495,906 5,640,172
35 441,405 3,577,535 494,729 5,144,266
40 435,905 3,136,130 493,020 4,649,537
45 428,520 2,700,225 490,458 4,156,517
50 2,271,705 3,666,059
Survival Probability [0 tends to (x, x+5)]
Age (x) Bangladeshi women Japanese women
15-19 0.91037 0.99593
20-24 0.90488 0.994854
25-29 0.89895 0.99353
30-34 0.89148 0.991812
35-39 0.88281 0.989458
40-44 0.87181 0.98604
45-49 0.85704 0.980916
Proportion of female Birth ASFR x Survival prob. x prop. Of female Birth
Age (x) Bangladeshi Japan Bangladeshi Japan
15-19 100/ (100+104) 100/ (100+106) 52.727 2.608
20-24 100/ (100+104) 100/ (100+106) 67.972 19.107
25-29 100/ (100+104) 100/ (100+106) 47.000 44.042
30-34 100/ (100+104) 100/ (100+106) 24.550 44.832
35-39 100/ (100+104) 100/ (100+106) 9.430 18.860
40-44 100/ (100+104) 100/ (100+106) 2.606 2.965
45-49 100/ (100+104) 100/ (100+106) 1.260 0.048
205.545 132.462
NRR for Bangladeshi =5x sum (ASFR x Proportion of female x survival probability)/ 1000
= (5 x 205.545)/1000
=1.028
NRR for Japan =5x sum (ASFR x Proportion of female x survival probability)/ 1000
= (5 x 132.462)/1000
=0.662
The following table presents the age specific fertility rates (per 1000) for Japan in the period 2000-2009. Use the information provided in the table to answer Questions e and f.
Age 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Age-specific fertility rate (per 1000)
15 0.14 0.16 0.19 0.19 0.16 0.15 0.16 0.15 0.15 0.18
16 0.67 0.78 0.89 0.87 0.77 0.68 0.70 0.67 0.69 0.69
17 2.45 2.74 2.87 2.65 2.54 2.27 2.36 2.19 2.37 2.36
18 5.46 5.75 5.94 5.46 5.32 4.91 5.06 4.84 5.18 4.96
19 10.35 11.00 11.29 10.60 10.51 9.70 9.45 9.42 9.72 9.43
20-24 33.99 34.92 34.96 33.42 33.01 32.03 33.04 32.31 32.48 31.17
25-29 93.86 90.49 87.40 84.06 82.01 78.87 81.57 81.18 81.95 80.95
30-39 67.27 66.04 65.52 65.05 65.92 64.70 68.44 70.39 72.42 73.41
40-49 2.61 2.68 2.86 3.05 3.26 3.33 3.69 4.10 4.42 4.75
e.What is the cumulative fertility rate for the 2005 birth cohort to age 18?
The cumulative frequency of birth for the 2005 to age 18 = 8.01 (per 1000 women)
f.What is the total fertility rate for Japan in 2008?
The total fertility rate of Japan in 2008 = 5 (209.38)
=1046.9 per 1000 women
A.2. Mortality and Standardization
The numbers of population by age on 30/6/2010 and the age specific death rates (ASDR) per 1000 population in 2010 for Japanese and Bangladeshi female population are given in the following table: Japan Bangladesh Number of Deaths ( pop x ASDR/1000)
Age x Female Pop. ASDR (per 1000) Female Pop. ASDR (per 1000) Japan Bangladesh 0-4 2,577,000 0.586 8,816,000 17.149 1,510 151,186 9-May 2,723,000 0.08 9,179,000 1.4 218 12,851 14-Oct 2,877,000 0.071 8,820,000 0.739 204 6,518 15-19 2,929,000 0.164 8,180,000 1.2 480 9,816 20-24 3,106,000 0.255 7,434,000 1.22 792 9,070 25-29 3,531,000 0.29 6,719,000 1.411 1,024 9,481 30-34 4,073,000 0.408 6,269,000 1.929 1,662 12,093 35-39 4,761,000 0.565 5,565,000 1.98 2,690 11,019 40-44 4,251,000 0.831 4,335,000 3.042 3,533 13,187 45-49 3,932,000 1.263 4,032,000 3.799 4,966 15,318 50-54 3,812,000 1.935 3,033,000 6.971 7,376 21,143 55-59 4,414,000 2.763 2,290,000 8.819 12,196 20,196 60-64 5,062,000 3.94 1,787,000 16.071 19,944 28,719 65-69 4,304,000 5.953 1,406,000 29.601 25,622 41,619 70-74 3,742,000 9.832 1,033,000 53.709 36,791 55,481 75-79 3,355,000 18.01 674,000 67.189 60,424 45,285 80-84 2,643,000 34.614 359,000 87.149 91,485 31,287 85+ 2,716,000 107.652 162,000 275.4 292,383 44,615 64,808,000 80,093,000 563,300 538,884 Total Using the mortality data provided in the previous page, estimate:
a. The actual number of deaths and crude death rates (CDR) for Japanese and Bangladeshi female population in 2010.
Note: use 0 decimal places (dcp.) for the number of deaths and 3 dcp. for CDR.
From the table above, the Total Number of Deaths in 2010 female population of:
Japan=563,300
Bangladeshi=538,884
Crude Death Rates (CDR) for the countries,
Japan: CDR= (Total no. of Deaths /population) x1000
(560472.475 /64,808,000)1000
=8.648
Bangladeshi: CDR = (538,884/80,093,000) 1000
=6.728
b. Using the 2010 Japanese female population as the standard population, calculate the indirectly standardised death rates (ISDR) for Japanese and Bangladeshi female population (Note: use 3 dcp. decimal point for SDR).
Expected number of death= sum[(ASDR standard x population Agex)/1000
Japan Bangladesh Age x Female Pop. Expected number of death ASDR (per 1000) Female Pop. Expected number of death ASDR (per 1000) 0-4 2,577,000 1,510 0.586 8,816,000 151,186 17.149 9-May 2,723,000 218 0.08 9,179,000 12,851 1.4 14-Oct 2,877,000 204 0.071 8,820,000 6,518 0.739 15-19 2,929,000 480 0.164 8,180,000 9,816 1.2 20-24 3,106,000 792 0.255 7,434,000 9,070 1.22 25-29 3,531,000 1,024 0.29 6,719,000 9,481 1.411 30-34 4,073,000 1,662 0.408 6,269,000 12,093 1.929 35-39 4,761,000 2,690 0.565 5,565,000 11,019 1.98 40-44 4,251,000 3,533 0.831 4,335,000 13,187 3.042 45-49 3,932,000 4,966 1.263 4,032,000 15,318 3.799 50-54 3,812,000 7,376 1.935 3,033,000 21,143 6.971 55-59 4,414,000 12,196 2.763 2,290,000 20,196 8.819 60-64 5,062,000 19,944 3.94 1,787,000 28,719 16.071 65-69 4,304,000 25,622 5.953 1,406,000 41,619 29.601 70-74 3,742,000 36,791 9.832 1,033,000 55,481 53.709 75-79 3,355,000 60,424 18.01 674,000 45,285 67.189 80-84 2,643,000 91,485 34.614 359,000 31,287 87.149 85+ 2,716,000 292,383 107.652 162,000 44,615 275.4 64,808,000 80,093,000 Total 563,300 538,884 Standardized mortality ratio= (Actual deaths/ Expected Deaths)
For Japan=560472.475/563,300 =0.995
For Bangladesh=538,884/538,884=1.000
Indirect SDR= SMR x CDR standard population
For Japan=8.648 x0.995 =8.605 deaths per 1000 population
For Bangladesh=6.728×1.000 =6.728 deaths per 1000 population
c.If the standardized mortality ratio (SMR) for Bangladeshi population is estimated 4.52 and for Japanese population is estimated 1.00. Using the 2010 Japanese female population as the standard population, what are the new values of the indirectly standardized mortality rates (ISDR) for Bangladeshi population and for Japanese population?
If the estimated SMR= 4.52 and 1 for Bangladeshi and Japan respectively, then the new values of ISDR
For Bangladesh= 4.54 x 6.728 = 30.545
For Japan=1 x 8.648 = 8.648
A.3. Population Projection
Project the female population of Japan from 2010 to 2015 with the following assumptions:
Female mortality is constant at the levels described by the 2010 Japanese female life table,
Fertility declines by 5% from its level in 2010 levels,
The sex ratio at birth is 106 males per 100 females.
The additions of population in 2010 are also affected by net female migration.
The estimated numbers of females in Japan by age on 30/6/2010 and age-specific fertility rates (per 1000) for Japanese in 2010 are presented in the following table:
Age (x) Number of females
on 30/06/2010 ASFR
(per 1000)
in 2010 Proportion Surviving
x à x+5 Projected
Female pop. before Migration Net
Female Migrants
in 2015 Projected
Female
Population in 2015
0-4 2,577,000 0.9993 2,577,000 -3,299 2573701
5-9 2,723,000 0.9997 2575196.1 -977 257419.1
10-14 2,877,000 0.9994 2722183.1 174 2722357.1
15-19 2,929,000 5.4 0.9987 2875273.8 7,771 2883044.8
20-24 3,106,000 39.6 0.9987 2925192.3 10,649 293584.3
25-29 3,531,000 91.4 0.9983 3101962.2 -1,898 3100064.2
30-34 4,073,000 93.2 0.9976 3524997.3 -3,462 3521535.3
35-39 4,761,000 39.3 0.9966 4063224.8 -1,630 4061594.8
40-44 4,251,000 6.2 0.9948 4228894.8 401 4229295.8
45-49 3,932,000 0.1 0.9921 3900937.2 252 3901189.2
50-54 3,812,000 0.9885 3900937.2 -139 3900798.2
55-59 4,414,000 0.9835 3768162 856 3769018
60-64 5,062,000 0.9598 4341169 2,306 434375
65-69 4,304,000 0.9627 4858507.6 1,105 4859612.6
70-74 3,742,000 0.9348 4143460.8 724 4144184.8
75-79 3,355,000 0.8803 3498021.6 406 3498427.6
80-84 2,643,000 0.7762 2953406.5 139 2953545.5
85+ 2,716,000 0.4725 1248817.5 21 128838.5
Total 64,808,000 51,232,586
Note: Use 5 decimal places for proportion surviving ( x à x+5)
Use 0 decimal places for the projected population
Some values from the Tx column of an abridged life table (l0 = 100,000) for Japanese females (2010) are presented in the following table:
Age x 5Lx Tx Age x 5Lx Tx
0 498,769 8,627,756 50 486,565 3,666,062
5 498,414 8,128,987 55 480,988 3,179,497
10 498,244 7,630,572 60 473,053 2,698,509
15 497,965 7,132,329 65 461,643 2,225,456
20 497,427 6,634,364 70 444,446 1,763,813
25 496,765 6,136,937 75 415,454 1,319,367
30 495,905 5,640,172 80 365,730 903,913
35 494,729 5,144,267 85 283,872 538,183
40 493,020 4,649,538 90 254,311
45 490,456 4,156,518
B.1.Using the results from A.1, describe and comment on the differences in the fertility parameters (ASFR, TFR and NRR) of Bangladeshi and Japanese female population. Comment on how do the values of Net Reproduction Rate (NRR) for Bangladeshi and for Japanese female population in 2010 compare to the replacement level? Suggest possible causes or determinants of its differences in those fertility measures.
According to result of A1, the fertility parameters of Japan and Bangladeshi vary significantly owing to the population contents and growth of the two countries. The TFR, NRR as well as the ASFR of Bangladeshi are higher than that of Japan due to a number of factors. Notably, the NRR of Bangladeshi reflects high female proportion and survival probability raising the figure higher than that of Japan in 2010 at the replacement level. More importantly, with this projection, Bangladeshi shows strong signals of reproduction rate, for women aged 15 to 44 (at the reproductive age). Japan on the other hand shows strong signal of fertility rate owing to different population growth indicators.
Some of the possible causes of the differences in fertility measures are owed to survival mechanisms of the women population, social interactions, and the pre-existing fertility conditions. The determinants of these measures are the fertility transitions, mortality changes, income levels of the population, and the net production rates.
B.2.Using the results from A.2, describe and comment on the differences in the mortality parameters (CDR and I-SDR) and patterns of Japanese and Bangladeshi female population. Please justify what are the possible reasons of its differences.According to A2, Japan shows high mortality parameter rates in terms of CDR and ISDR than Bangladeshi. The female population is high in Bangladesh than In Japan. However, the expected number of deaths is high in Japan than in Bangladesh. The difference is owed to the differences in their ASDR.
The possible reasons for this difference are among others due to their significant differences in the social strata of the two countries that reflect high population variances. The economic differences of the two nations is big as well making different population indicators, perceptions, and the health pre-existing conditions to vary.
a. Compare and contrast the main characteristics of the long term population projections produced by the following five organisations (mention at least two points for each organisation):
United Nations (UN)
The UN publishes their population projections every 2 years with scenarios which differ in their assumptions on fertility rates. The main characteristics of these projections produced by the United Nations are production of these population scenarios with high, low and medium fertility trends assumptions in the future ((Brian, et all. 2001, pp 203-238).). It also characterized by scenarios that illustrate the influence of rising life expectancy on projection outcomes though comparisons of fertility and alternative mortality scenarios in the future.
World Bank (WB)
Population projections characterized by their annual projections at the country levels. The long term projections are six biennial projections to 2150, which have base case and assumptions of either slow or rapid fertility decline. Their long-term projections are also characterized by 40 years projection output, and mainly for internal use.
(3) US Census Bureau (USCB)
The USCB long term projections are characterized by single a scenario with printed versions that show their output for 15 to 25 years into the future. Their projections are updated annually through to 2050.
(4) International Institute for Applied Systems Analysis (IIASA)
The IIASA population projections are characterized by three scenarios of output in 13 regions in the world through to 2100. The three outputs are fertility, mortality, and migration. The main characteristic of this institution is that they provide probabilistic output.
(5) Population reference Bureau (PRB)
The long-term population projection of the PRB is characterized by limitations of their public output to population size. In addition, their projections combine country-supplied projections, projections by the UN as well as that of the USCB to generate their own projections in minority of countries. The main characteristic of their projections is their generation of projections if only in access to more and reliable data on baseline population, fertility and mortality (Brian, et all. 2001, pp 203-238).
b. What projection method is used by each of these organizations?
The projection method used by all the above institutions is the cohort-component methodology.
c. What are the two possible approaches discussed for allowing for a range of projected outcomes relating to assumptions about the future?
The two approaches discussed are the single scenario and the use of different scenario approach. They also use time based approach for projections.
d. Summarize in point form (cover at least 5 points), the issues discussed in section 5 relating to assumptions for fertility trends for different countries over the future period of projections.
Individual institutions have made massive steps in making significant contributions in making global projections in population by of use different methodologies in population projections
United States and the United Nations have taken leadership roles and contributions to population projections in the world that are significant in global socio-economic planning.
Most long term projections have myriad approaches but are characteristically based on time series scenarios that cover periods of time.
The input assumptions which are the basis of these projections, for instance future rates of fertility, mortality and migration, vary considerably with the number output scenarios produced.
The United Nations are best suited in producing long term projections based on their 10 years approximations which caters substantial changes and assumptions over the period.
Reference List
Brian, et all. 2001, A Guide to Global Population Projections, Demographic research, vol (4); p 203-288.
Frejka, T., & Sardon, J.-P. (2004). Childbearing trends and prospects in low-fertility countries: a cohort analysis. Dordrecht [u.a.], Kluwer.
United Nations. (2009). Completing the fertility transition. New York, N.Y., United Nations.
Money And Banking
Money And Banking
Until in 2007, advance in monetary economics had led to academic economists as well as, policy makers to argue that there was a well definition of monetary policy in regards to the Federal Reserve. The Federal Reserve also known as “the fed” defines the monetary policy as an action it undertakes the government to influence the availability as well as, the cost of money and credit. Study shows that the expectations of market participants always play a significant role to determine prices and growth (Wicker pg. 132). Monetary policy is also defined as the policies, statements and actions of the fed so as to influence how the future is perceived. Therefore, the fed in this case acts as the last resort or the lender to the nation’s financial system, for instance, the fed ensures that there is a continued smooth functioning of the financial intermediation by ensuring that they have provided financial markets with an adequate liquidity. In summary, this paper will give a report on the monetary policy of the Fed (Open market operation, reserve requirement, discount rate) during the economic crisis between 2007 and 2009.
The congress for many years have delegated the responsibility for the monetary policy to the fed, however they retain an oversight responsibilities of ensuring that the fed adheres to the statutory mandate of long-term interest rates and maximum employment. The aim of the fed is to ensure that the nation’s central bank falls into categories of monetary policy to ensure that there is financial stability through the lender of resort function as well as providing payment system services to the financial firms and to the government. Traditionally, it is evident that the fed implemented monetary policy through open market operation, reserve requirement and discount rate. Open market operation majorly involved with purchasing and selling of the United States Treasury securities. The fed conducted the operations by ensuring that interest rate targets are set, this was significant in that it allowed the fed to fulfill its statutory and legal mandate of stable prices, maximum employment as well as, moderate long-term interest rates. Therefore, it can be evident that the interest rate targeted are the federal funds rate, which are the price at which most banks buy as well as, sell reserves on an overnight basis. This federal funds rate can be then linked to other short-term rates like economic recessions and inflation expectations, which in turn will influence the longer-term interest rates.
Consequently, Economic recession takes place when there is a fall-off in demand of consumers. When there is a slow growth, most businesses fail to expand making them not to hire new workers. In this case, recession is said to be underway although, it only affects people when layoffs begin. The U. S has become a victim to economic recession and most experts have given their views regarding the situation. For this case, the Government of the U.S needs to know that they are the key players for stopping recession and diverting economy to growth path. The government should also focus on how to increase money circulation, the debt level of per capita and any other causes of recession.
Conversely, interest rates are renowned to have been affecting the interest-sensitive spending such as the business capital spending especially on plant and equipment, residential investments as well as, household spending on consumer durables. Through this, monetary policy can be used to slow aggregate spending in the short run (Hetzel, pg 172). A stable rate of inflation is significant in promoting price transparency however, monetary policy is said to affect inflation in the long run. According to the report submitted by the fed government, it is noted that direct lending is significant in response to the financial crisis, as a result, the fed managed to create a number of new ways of ensuring that they inject reserves, credit, as well as, liquidity into the banking system, and making loans to firms that are not banks. This was significant because these allowed the people to pay back the loans with interest.
For instance, according to Raymond, he argued that in order to resolve the issue of negative impacts of interest that affects the economy, the U.S president should lower the interest rates to enable business and consumers to get back on their feet. I believe this will help in resolving the problem because credit access should never be barriers for a justifiable enthusiastic entrepreneur for starting a business, therefore reducing interest rates will fortunately stop this. I therefore believe that, the U.S president should have his hands to steer this aspect by balancing interest rates as well as, inflation. When inflation increases, interest rates should also increase to discourage borrowing (Brezina, pg. 123).
Conversely, according to Kathy Lee, she also argues that the U.S president should raise taxes while reduce government spending. The U.S government should give tax to encourage the citizens of U.S with enough money for saving and investing in stocks, bonds or start businesses to enable new job created and money that lies idle in bank is routed to healthy use. On the other hand, I also agree with Patricia advice regarding the Federal Reserve. It is true that government should encourage selling of bonds and raising the requirement of the bank reserve since it will improve the stability of many banks to customers’ deposits. Lastly, I also believe that the U.S President should raise interest rates as well as, encouraging savings. I agree to this argument because since people without saving is said to be roofless. The president should encourage saving starting from the micro-economics to macro-economic and aliasing with the congress by giving out tax sops to the citizens abroad, which in turn bring back money to the country to invest there. The graph below represents the fed funds rate target.
Works cited
Brezina, Corona. Understanding the Federal Reserve and monetary policy. New York: Rosen Pub., 2012. Print.
Hetzel, Robert L.. The monetary policy of the Federal Reserve: a history. Cambridge: Cambridge University Press, 2008. Print.
Wicker, Elmus R.. Federal Reserve monetary policy, 2007-2009. New York: Random House, 2007. Print.
MONETARY POLICY. Incentives altered by the monetary policy
MONETARY POLICY
Name
Institution
Incentives altered by the monetary policy
The Reserve Bank of Australia is held accountable for creating and putting monetary policy into practice. Australia has balanced exchange rates hence its money management policy includes the management of temporary interest rates to accomplish the objectives of domestic policy. Other countries, Canada and New Zealand, with developed economies apply this approach. In other nations, an optional center if interest for money management policy is the exchange rate. For instance, they may decide to have their base their exchange rate to a common global currency.
Monetary policy affects business investments in a number of ways. For instance, it affects saving and investment. Increased interest rates increase lending costs to finance expenditure. They also push up the inducement to save or reduce the rate of spending. This will in turn affect the profits of businesses. Real estate business are also affected when the there is high interest rates. This will make them delay the purchase of homes or decrease the amount of money they can spend in purchasing a house (Enright & Petty 2013, p. 65). When the interest rates reduce, businesses are able to borrow large sums of money which can be used in other investments. Consequently, the fluctuations in the number of housed being constructed or purchased will affect the price and demand of other goods like building materials. This will in turn affect those companies dealing in building materials and employment in the industry. When there is an increased cost of investment, less business savings projects are anticipated to produce sufficiently increased rates of proceeds to indicate their progress. However, such projects are carried out when the lending rate is reduced. It is always difficult to detect such changes since an organization involves a lot of vital factors controlling its investment.
The other way monetary policy affect business investment is through cash flow. The cash flow effect for organizations is considered to be less complex since most of them are major net borrowers. Fluctuations in interest rates can have a huge effect on the total cash flow of companies. For instance, in 1980s when the unpaid debts and interest rates were high, total business payments increased up to more than one-third of total profits. This limit on cash flow was definitely one of the reasons why there was a subsequent decrease in business investment in the subsequent years, even though other common recurring factors were also vital. Monetary policy also affects companies through money and credit. When there are increased monetary restrictions, the lending rates for banks are also controlled. The process of rationing loans implies that local banks will not receive enough funds hence they will be forced to regulate their lending rates. Therefore, it will not be easy for companies to obtain loans. If they will have to be given loans, then it will not involve huge sums of money thus this will have an effect in their development projects. However, the lending rate is not expected to change when the monetary policy introduces tight financial conditions (Wiedemer 2012, p. 22). Tight monetary regulations will affect the economy. Companies are not willing to borrow money in for development in the declining economies reducing the total credit improvement.
Fluctuations in interest rates can have an impact on the value of properties hence affecting the possessions and spending choices individuals. In turn, a number of businesses will also be affected since people will not be having enough money to purchase their products. There are a number o categories of properties through which this process might function. These include: residences, possession investments, shares, or other monetary investment. Hypothetically, increased interest rate is anticipated to create a reduction in the value of the properties since the opportunity cost for possessing the assets will be high. On the other hand, then the value of properties is low, the spending rate is anticipated to reduce though reduced wealth and lending capacity to the point that the properties concerned could have served as a security loan.
Monetary policy causes variations in the exchange rates which will in turn affect the prices of both local and foreign goods and services. For instance, a reduction in the interest rates increases the prices of imported goods. This will then affect the average prices of products bought because imported goods always have a direct relationship with the local spending. Business will be affected when the average price of goods is lower than normal. Their returns will decrease since they will be selling their products at a lower cost than that used in production. Monetary policy affects wage and price-setting. If monetary policy accomplishes its main goal of stabilizing prices, then inflation prospects will remain reduced. Therefore, wage and price-setting will also be low. It is important to note that fluctuations in demand can create anxiety in the labor market and intermediary goods market hence affecting wage and price-setting.
Reasons given by the Reserve Bank for its decision to raise interest rates in April 2010
Before the increase in the interest rates in 2010, reserve bank gave many reasons to justify their action. For instance, the government stated that the consensus to increase the lending rate was due to the fact that the international economy was steadily advancing and the GDP is also anticipated to rise in the subsequent years. The growth is still uncertain in some major nations since there was an ongoing legacy of the financial crisis leading to the continuing excess capacity. They gave an example of Asia which had undivided financial sector hence their growth has been tremendous (Desai 2011, p. 58). This effect creates pressure on the values of raw materials. The other reason provided was that the country was experiencing an increase in their trade conditions, adding to returns and advancing an upsurge in investment in the resources sector. In this situation, the output advancement in the country in the next coming years was expected to be more than that of the previous year, despite the fact that the effects of previous expansionary policy actions will be reducing.
The rate of unemployment appeared to have peaked at a reduced level that that which had been previously anticipated. The process of company sector de-gearing was becoming reasonable since the rate of reduction in business credit was also becoming less. This implied that additional lenders were increasingly becoming more prepared to lend some borrowers. The country’s housing dept was on the increase at a higher rate. Fresh provision of loans for housing have restrained in the last few months due to the increase in lending rates. However, at this time the market for creating houses is still distinguished by significant resilience, with the continuous increase in prices experienced at the beginning of 2010. The inflation has increased due to the increase in the temporary factors that had been holding it (Ferran 2012, p. 282). The government also noted that inflation was anticipated to be consistent with the set objective in 2010.
With the danger of serious economic reduction in the country having experienced some time back, the board has been reducing the level of monetary incentive that was installed when the outbreak was experienced to be much less. Loan providers have increased their rates higher than the cash rate. Lending rates to majority of the borrowers have been at a reduced rate than the normal. Therefore, the board decided that it was necessary to increase the interest rates because the growth was most probably to be around trend and price increases close to the objective in the coming year.
Australia’s monetary policies between 2006 and 2013
Arguably, the Australian monetary policies have been appropriate for the economic circumstances during this period because it has assisted in retaining the total internal balance. Especially, the country’s credible med-term inflation targeting structure has functioned appropriately throughout this period. Conversely, it is also important to note that monetary policy interfere with the factors determining the economy. The policy should not interfere with the occurrence of structural change. Monetary policies have played an important role in the total demand and supply is in wide balance hence organizations have been able to carry out staffing, investment, and production with realistic buoyancy concerning the safety of the overall economy (Mishkin 2007, p 424). Since the international financial crisis became more serious in 2008, the loosening of the monetary policy definitely played an important role to the Australian economy. Due to the relaxation, there was a change in the country’s temporary lending rates and exchange rate.
By first looking at the interest rate, Reserve Bank decreased authorized lending rates by 4.25%. This was after it was reduced from 7.25% to 3%, one of the lowest authorized lending rates. This implies that there was an additional household income per year. For instance, when housing loan of $200,000 is reduced by 3%, there would be an additional domestic income of $6000 per year, a huge multiple of $990 given out from the central government as a financial aid. Reduced lending rates also had an impact on the country’s economy. Most of the private companies which depended on credit during their constrained periods were relieved. This is considered to be applicable from employment viewpoint since unemployment mostly affects the private firms and not the public companies. Reduced lending rates also reduced the country’s exchange rate with more stimulatory effects.
The monetary policies have led to the reduction in the employment rate and increase in business investments. Moreover, the country has also experienced its retail sales increase above the rate that can be sustained. In 2008, monetary policy led to a reduction in the exchange rate and prices of products. This reduced the price of imported goods hence people were able to carry out purchases thereby improving their economy caused by the continuous flow of money.
List of references
Desai, P., 2011, From financial crisis to global recovery. New York, Columbia University Press.
Enright, M. J., & Petty, R., 2013, Australia’s Competitiveness From Lucky Country to Competitive Country. Hoboken, Wiley. http://msvu.eblib.com/patron/FullRecord.aspx?p=1187724.
Ferran, E., 2012, The regulatory aftermath of the global financial crisis. Cambridge, Cambridge University Press.
Mishkin, F. S., 2007, Monetary policy strategy. Cambridge, Mass. [u.a.], MIT Press.
Wiedemer, J. P., 2012, Real estate finance. Mason, Ohio, South-Western.