Economic and Monetary Policy
Auditing and Business Concepts
Submitted by: Edmore H. Delaney
Perspective of the Economic and Monetary Policy Framework of the Republic of Liberia
This paper is intended to capture the framework of the economy and monetary policy of the Republic of Liberia and the effectiveness it pursues in the implementation its institutional framework. The economy continues to be plagued by a multiplicity of social, financial and economic challenges which has seen production level of the sector far below prewar levels (Findlay & O’Rourke, 2007). Consequently, the government’s approach has been directed towards vigorous pursuing ...view middle of the document...
, and the generally weak business environment.
The Ebola epidemic has further weakened the struggling economy affecting agriculture, tourism and the mining sector. The financial sector of the economy has become very small with a few deposit-taking institutions, therefore the country’s aggregate loan portfolio shows little small impact on the macroeconomic status due to selective lending. According to ( ), the Central Bank of Liberia policy is to maintain exchange rate stability in the Liberian Economy, and by extension, price stability. The shortage of foreign reserves has undermined the CBL’s ability to periodically intervene in the market when it becomes necessary to do so.
The cost of living
Currently, China is engaged in interest rate liberalization which is expected to increase the effectiveness of the indirect money supply to the economy (Liao & Tapsoba, 2014, p. 19). The current economy of the country is moving more towards market orientation, and they are losing the market interference (Ligang, 2013). China is focusing in achieving the balance economic growth, inflation through industrial up-gradation and rebalancing through effective financial policies.
China's economic policy is aggressive and pulling more capital investment for infrastructure development, more measures to control population in a stringent manner and more investment in technology across various sectors will boost the slowing economic growth (Silverstein, 2013). Overall monetary policy and economic policy of the country is effective. Both these policies aim at reducing the inflation, unemployment and in boosting the economy. Likonomics has mainly three pillars namely, Structural reform, retreating the stimulus policy and financial sector deleveraging for boosting the entire economy of the country (Drysdale, 2013).
Various tests have been performed in evaluating the effectiveness of monetary policy of China; FAVAR was conducted by John Fernal, Mark M. Spiegel and Eric. T. Swanson of Federal Reserve Bank of San Francisco indicates that the transmission of China monetary policy is more effective (Fernald, Spiegel, & Swanson, 2014, p. 21). There monetary policy and economic policy are effective that attracts more foreign country investment, but at the same time economy did not collapse due to 2008 recession and still continues to grow and remains a good destination for investment.
In this segment, we will compare and contrast between Japan and China. Japan makes use of Abenomics, which focus mainly into monetary policy expansion and fiscal policy expansion and structural reform. In this, both monetary policy and fiscal policy are based on Keynesian model and structural reform focuses only on supply side and in deregulating the economy (Drysdale & Fujiwara, 2013, p. 9). Yen is always kept at lower rate in order to boost the economic output, and Japan raises fund by issuing a huge amount of bonds. Consumption is the main driver for the...