International Economics
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Dominick-Salvatore-International-Economics
Source: D. Salvatore, “The Global Financial Crisis: Pre-
dictions, Causes, Effects, Policies, Reforms and Prospects,” Journal of Economic Asymmetries, December 2010, pp. 1–20. committee of the world economy. In 2009, the G-20 included the finance ministers and central bank governors of the following 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States. The twentieth member was the European Union, which is represented by the rotating Council presidency and the European Central Bank. In addition to these 20 members, the following forums and institutions, as represented by their respective chief executive officers, participate in meetings of the G-20: International Monetary Fund (IMF), World Bank (WB), International Salvatore c21.tex V2 - 11/07/2012 10:29 A.M. Page 714 714 The International Monetary System: Past, Present, and Future Monetary and Financial Committee (MFC), and Development Committee (DC) of the IMF and World Bank. The G-20 met in London in April 2009 to propose policies to overcome the deep financial and economic crisis and push for reforms to prevent future crises based on (1) strengthening financial supervision and regulation, (2) fostering international policy coordination, (3) reforming the IMF, and (4) maintaining open markets. Other meetings followed aimed primarily at reforming the international financial system and providing a new direction for the world economy, but to date (2012), not many concrete steps have been taken to attain these goals. 21.6 F Other Current International Economic Problems The problems arising from the present exchange rate arrangements and from the global finan- cial and economic crises that we’ve discussed are closely related to other serious economic problems facing the world today: (1) slow growth and high unemployment in advanced economies after the “great recession”; (2) trade protectionism in advanced countries in the context of a rapidly globalizing world; (3) large structural imbalances in the United States, slow growth in Europe and Japan, and insufficient restructuring in transition economies of Central and Eastern Europe; (4) deep poverty in many developing economies; and (5) resource scarcity, environmental degradation, and climate change that endanger growth and sustainable world development. This section suggests possible solutions to these interrelated problems at which we can arrive after the study of international economics. 1. Slow Growth and High Unemployment in Advanced Economies after the Great Recession In 2010 and 2011, advanced economies experienced slow growth and high unemploy- ment as they came out of the most serious financial and economic crisis since the Great Depression of 1929. The United States and other advanced nations responded by rescu- ing banks and other financial institutions from bankruptcy, slashing interest rates, and introducing huge economic stimulus packages. These efforts, however, only succeeded in preventing the economic recession from being deeper than otherwise. Even though the recession was officially over in 2010, slow growth and high unemployment remain the most serious economic problems facing most advanced nations today. These prob- lems are even greater for Greece, Ireland, Portugal, Spain, and Italy (all members of the 17-nation European Monetary Union), which remain in deep crisis from overborrowing, unsustainable budget deficits, and loss of international competitiveness. Advanced economies could try to stimulate growth and reduce unemployment with additional expansionary fiscal and monetary policies, but with already large and unsus- tainable budget deficits and huge amounts of excess liquidity already in the system, these policies may be ineffective and could even backfire. Larger budget deficits could discourage private consumption because consumers anticipate paying higher taxes in the future to pay for the higher budget deficits. Similarly, by adding more liquidity when so much is already in the system may not stimulate investments and growth and only pose greater inflationary pressures in the future. To increase growth it may be more promising to further restructure the economy and improve education and infras- tructures. But these policies take years to bear fruit, are difficult to implement in times of slow growth, and require additional expenditures at a time when most nations face already high and unsustainable budget deficits. Salvatore c21.tex V2 - 11/07/2012 10:29 A.M. Page 715 21.6 The International Monetary System: Present and Future 715 2. Trade Protectionism in Advanced Countries in the Context of a Rapidly Glob- Download 7.1 Mb. Do'stlaringiz bilan baham: |
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