Question

The Global Financial Crisis

6. Explain government interventions to resolve the crisis.

7. What are the Macroeconomic Policy Lessons?

8. How should they redesign regulation policy?

Answer 1

The 2007 2008 global financial and economic crisis and the interventions of various governments to stabilize their economy is have generated debates and controversies regarded the benefits of the free market system and the function of government in the economy the purpose of the government intervention the ultimate object of the government intervention was to normalise credit conditions and resume sustainable economic growth this interventions had three main objective containing and reversing the string in financial market by providing liquidity and funding guarantees removing impaired assets from banks balance sheet recapitalising in reconstructing viable in liquid Financial Institutions to each of these objectives government authorities implemented several policy measures unparalleled some of liquidity injections available to widen set of counterparties providing guarantees to avoidant set of counterparties reducing credit through the purchase of credit instruments providing guarantees to bank liabilities capital injection and recapitalisation of financial institution relieving banks of impaired assets despite the criticism that the interventions have intensified the weight of public debt and the extent of government dependent accountabilities it cannot be defined that these interventionist policies have lesson the real effects of the financial crisis intervention programs was successful in helping the financial markets to return to their normal functions a more realistic way of evaluating whether the government has succeeded in intervention efforts is to determine if financial normality was reinstated at least cost of taxpayer at the height of crisis not intervention would have likely resulted in more costly losses for national economy in the terms of productivity and this would have worst and the governments finances the government receive assets in return for interventions these assets provide the government with legal entitlement to the potential revenues of the companies it had assistant therefore the interventions do not actually cause permanent losses to government finances

7. The years preceding the crisis work use of Hai Global growth for the most part this cloth is very healthy productivity growth was high inflation was table in most countries indicating that growth in activity was roughly consistent with the growth in Economics potential short term rates are very low reflecting accommodative monetary policy. In retrospect however it is clear that these conditions fed up the buildup economic systematic risk. On the policy front the Priya crisis period was characterized by increasing popularity of inflation targeting amount policymakers and Academics alive the crisis has the debate on whether economic policy should be concerned with S8 price booms and increase in leverage.

The crisis reasons to policy issues in relation to current account deficit and capital inflows the first is the need to represent when and how to react to large in balances through Macro Economic And structural policies that affect Savings and investment. S8 price in threaded Boom bust cycles are a common feature of financial crisis but not all bombs and up in disaster it is true that the acid side boobs are first credit expansions have been associated with episodes of financial distress equally true however is the fact financial development. Monetary policy the first question is whether responding to booms is a task for monetary policy the neglect view that central bank should focus on the primary objective inflation and growth S8 prices can be used fully monitor to the extent they might carry information on the state of the economy but should also been targeted in themselves this view rest in three main arguments it is difficult to distinguish speculative booms from episodes of rational exuberance the role of monetary policy is to control inflation monetary policy maybe to blend tool to stop a boon and policy intervention could harm more than good.

Speculative booms maybe indeed difficult to identify with certainty the analysis of potential and sustainable growth in credit and leverage is complex as it needs to take into account household corporation and financial intermediaries more gently the crisis between underscore the need to develop new measures of systematic risk.

8. The purpose of resigning the policy should be the objective in the resources of regulator the Institutions of the jurisdiction in which regulation is imposed the characteristics of a country for which regulation is contemplated more precisely the key dimensions along with the regulatory policy is differ a form function scope will be employed throughout the ensuing discussion the form of regulation encompasses the procedure employed to designer info secularity rules the nature of these rules are the locus of decision making authority in the regulatory area. They should limit the earning of reducer redistribution of income from producers to consumers of regulator product is common regulatory cold akki the dominant of the relative importance of regulatory goals is the likely consequences of failing to achieve the various goals if the failure to meet a particular goal would have substantial obvious immediate and adverse affect the regulator will likely give a goal a high priority over all regularity policy will also very over time has different levels of success at achieving various goals are realised this is the case even if regularity goals to not changed over time to illustrate suppose it is considered very important work to ensure the provision of high quality service and to promote least cost production initially the regulator might focus on the former objective and subsidize investment and Research and Development to enhance product quality even though doing so initially result in higher operating cost. Limited information about the regularity industry can influence the form function and scope of regulator's operation in particular when the regulators information is limited command and control regulation maybe inferior to regulation in which substantial decision making authority is delegated.