And at last let's provide an explanation of the actions the ECB might take if the rumours of liquidity problems in other institutions prove to be correct.
Over the last few years, the euro area has witnessed a gradual recovery in economic activity. The recovery started in the second half of 2003 and has now led to ongoing trend growth rates that seem to be close to our present estimates of the potential growth rate of the euro area economy.
Several factors are behind the relatively gradual pace of this recovery, including oil price increases, the restructuring and reshaping of the productive sector triggered by global competition, and a possible decline in potential output growth.
First, taking a longer-term perspective, there is some evidence that, underlying the moderate growth rates over the last few years, there may have been a decline in trend potential output growth in the euro area, particularly when comparisons are drawn with most of the 1980s and 1990s. The trend potential output growth rate seems to have moved closer to the lower bound of the previously estimated range of 2.0-2.5%. The sustained decline in euro area labour productivity growth has been identified as the main factor explaining lower potential output growth. Euro area labour productivity growth (measured per hour worked) was 2.4% in the euro area from 1981 to 1990. However, during the period 1996-2004, productivity fell to 1.3%. Decomposing trend labour productivity growth, in turn, shows that this decline reflects both lower growths in total factor productivity and less capital deepening.
There is a wide consensus that the still significant structural rigidities in the euro area factor and product markets are likely to explain the lacklustre evolution in these components of potential output growth and, consequently, the relatively modest euro area growth rates in the recent past. While there is some evidence that euro area product and labour markets may have become somewhat more flexible over time, there is also a wide consensus that further structural reforms are needed to improve euro area labour productivity growth relative to other economic areas. In this context, expert groups have put a number of specific European policy initiatives and recommendations to promote productivity growth in the euro area forward.
After the second ECB rate hike, the monetary policy was repeated to be still accommodating. At what level do interest rates become neutral, i.e. when they neither stimulate nor brake economic activity.
When Jean-Claude Trichet, President of the European Central Bank reported on the decision of the ECB's Governing Council to raise the interest rates he said that ECB decision reflected their clear assessment at that time. They did not decide ex ante a series of monthly increases of rates as has
The European Central Bank (ECB) provides the control of monetary policy in the eurozone. At present, the inflation rate in the eurozone is slightly below target. From comments that have come from various spokespeople at the ECB over the last 2 months, we are aware that the central bank's monetary officials generally happy with the present course of inflation but do have concerns about some economic data that has recently been released, and by developments in the eurozone financial markets.
Also, due to the sensitivity of the role of banks in society, Central Government regulations and other national laws imposes safety and solvency regulations that makes it imperative to have enough money to run their operations and also have enough money to pay their clients as and when they come to them for their monies (Benston, 1999).
The whole financial system can collapse almost instantaneously, a system that has been in operation since even before man could read or write, has collapsed yet once more in 2007. This report tries to shed a light on a bank’s operations and illustrates how even diminutive factors can lead a bank to failure if neglected.
To begin with, essay describes that lenders supply money through the financial markets. Financial markets which consists of the bond markets, equity markets and the money markets. Secondly, through which lenders supply money is through financial intermediaries such as the banks, mutual funds, market funds, pension funds and insurance companies.
Employers see a lot of advantages in switching to DC schemes. The investment of pension funds into several equity, debt, and hedge fund instruments is also being explored to ensure that employees benefit from the switching of schemes.
A pension is a steady income promised to a person, usually after retirement.
The author states that the potential costs, and possible solutions to such problems, must be weighed against the benefits in order to determine whether short-term capital should be allowed to flow, without restriction. Basically capital account transactions are classified into portfolio investment and direct investment.
In financial practice it is not the question whether it is possible to forecast, but how the future path of a financial time series can be forecasted. Investors were obliged to revise this approach in the past eighteen months, due market crashes and historically high volatility.
The subprime mortgage crisis is an ongoing financial crisis, initially caused by individuals, businesses, and government entities that had borrowed and invested heavily in housing, followed by a significant decline in housing prices. This caused a ripple effect across the financial markets and global banking systems, as investments related to housing prices declined suddenly and significantly in value, placing the health of key financial institutions at risk.
This increases the demand of host country's currency and hence the host country's currency appreciates at the expense of the multinational's local currency. When many multinationals carry out FDI, the impact is quite bigger and hits the financial markets harder.
Henry Paulson spelt out the importance of the bail out and stated that the bailout would stabilize the economy, improve liquidity and also improve investor confidence, in my own view these reasons are justifiable given that investors had lost confidence with the market whereby stock prices kept dropping, on the other hand this was the only way to improve on the liquidity position of banks whereby banks lacked financial capital, if this actions were not undertaken then the cost of borrowing would have increased.
al banks monetary officials generally happy with the present course of inflation but do have concerns about some economic data that has recently been released, and by developments in the eurozone financial markets.
In this research let’s conduct an analysis of each of the
16 pages (4000 words)Essay
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