Economy Forward

When economies confront problems such as inflation, deflation, unemployment and recession, mainstream economists and policymakers refer to the situation as macroeconomic imbalance. They also provide reasons for the imbalance and propose various policy actions to stabilize the economy back to the balance. In this analysis, macroeconomic imbalance is referred to the situation that the total supply of goods and services of the economy is not equal to its total demand. For example, central banks around the world state that present inflationary pressures are due to the demand in excess of the supply consequent to the stock of money expanded and supply bottlenecks during the pandemic time 2020-21. The reasons they mostly cite for the expanded money stock are the money printing and bank credit created to fund the government budgets/spending on fiscal stimulus to fight the pandemic. Therefore, almost all central banks have started raising interest rates to reduce the monetary/credit growth...

  The media reported that the Cabinet, subject to further discussion of the views, approved a new Act as an improved version of the present Monetary Law Act (MLA) to facilitate operations of the Central Bank (CB) more effectively and efficiently in line with present requirements. The CB Governor repeatedly stated that new legal provisions would be introduced to grant the autonomy to the CB as a part of new macroeconomic management policy framework agreed with the IMF As the proposed Act is not available for public information, it is not possible to comment on the efficacy of the new Act as compared to the MLA that has been tested for 72 years with several amendments introduced from time to time without hurting the its macroeconomic policy framework. The architect of the MLA is John Exter, an Economist of the US central bank, the Federal Reserve System established in 1913. Therefore,  this short article,  hoping that legal officers of the CB are smarter macroeconomis...

The year 2022 was seen as a historic year of super-monetary tightening by central banks across the world to tame high inflation. This high inflation is commonly accepted as the result of global supply chain bottlenecks inclusive of the Russian invasion in Ukraine since February 2022. The dramatic increase in energy prices consequent to Russian-Ukraine war led inflation to be persistent and wide-spread across the world because of the energy-driven-world economy. Therefore, the present level of inflation is considered as 40-year high in the developed world. However, despite primary causes of such a high inflation, the policy response by central banks across the world has been to raise interest rates faster to bring down inflation to their targets in the unknown future. Therefore, this article is to highlight the present status of the world tight monetary policies as shown by last week’s monetary policy decisions of the US Fed (Fed), Bank of England (BOE) and European Central Bank (EC...