In: Economics
1-Contrast the actions a central bank of Oman (CBO) should take when an economy is in recession with production substantially below potential GDP and those needed when an economy is producing in overdrive above potential GDP
2-Identify the three government policies for assuring safe and stable banking systems.
Exceptional and far reaching fiscal and monetary policy adopted
by the central bank for advanced economy will stimulate the
spending and also aimed for addressing the public health. Oman
authorities give preference to support the non oil economic
activities which is more important in sustainable growth. Central
Bank of Oman give preference for the improvement of three financial
performance; institution size, asset management and operational
efficiency. If the economy want to overdrive above the potential
GDP, the central bank should increased the pumping of money to the
economy. Increasing the level of money in the economy will increase
the demand for goods and services and also shifts the level of
aggregate demand. Here the production will come above the potential
GDP. The expansionary monetary policy by Oman attracts more
investors to the oil production and the average GDP will raise from
the actual point.
One of the most important policies by government regarding
stability of the banks is nationalisation. Government have full
power to regulate the banking activities and also undertake the
banks under certain situations. This nationalisation also
strengthens the balance sheet of the banks. Enhancing the non
banking financial corporations will expand the banking activities
even in remote areas and develop the rural areas also. Providing
banking license to the private banks also increase the level of
profit earnings in the economy. Other major government policies are
granting license to set different types of payments, encouraging
foreign banks to convert the owned subsidies.