essay about economic policy

Lessons learned from the breadth of economic policies during the pandemic

The COVID-19 pandemic resulted in the sharpest and most synchronized reduction in global economic activity in history. The U.S. economy experienced a V-shaped recovery of a type not seen in recent recessions. The rapid recovery was due to two factors. First, the recession itself was caused by a shock associated with COVID-19; as that shock retreated—and people learned to better live with the pandemic—the economy was poised to recover quickly, just as it typically does after natural disasters. Second, the policy response protected household incomes and kept many businesses intact so that they were in a position to resume more normal levels of economic activity when it was safe to do so.

Recession Remedies podcast episode: What should we learn from the economic policy response to COVID-19?

Real disposable personal incomes actually rose in 2020 and 2021 as transfer payments from the government vastly exceeded lost incomes from other sources. As a result, poverty, after accounting for taxes and transfers, fell in 2020 to the lowest level since the data series began in 1967. Initially, observers and policymakers worried that a cascade of bankruptcies and defaults could precipitate a financial crisis. But improvements to make the financial system more resilient in the wake of the global financial crisis and the policy response to the COVID-19 crisis quickly addressed potential issues. 

The economy experienced major side effects from the pandemic and associated policy response, most notably the highest inflation rate in 40 years, far outpacing the increase in wages and leading to the largest real wage declines in decades. Ultimately, the economic policy response to the COVID-19 recession should be judged not just by its consequences in the spring of 2020, not what happened over the next two years, but also by the longer-term effects, and whether the response will prove to have contributed to a stronger and more sustainable economy going forward. 

Evidence on the COVID-19 economic policy response  

• The initial fiscal response in the U.S. was large. It waned in mid-2020 and then surged again in late 2020 and early 2021.
• Economic Impact Payments, Unemployment Insurance, forbearance programs on mortgages and student loans, and an enhanced CTC played the largest roles in lifting household finances, while businesses received support largely through grants and subsidized loans.
• Even after the initial substantial fiscal assistance, observers generally expected a much slower economic recovery from the second quarter 2020 trough than actually came to pass.
• The U.S. government incurred substantial debt. Moreover, inflationary pressures and the efforts to moderate those pressures might bring an end to the expansion.
• The U.S. fiscal response appears to have been larger than any other country.

Lessons learned from the breadth of economic policies during the pandemic  

Policymakers should take the lesson from the past two years that vigorous fiscal and monetary policy can boost income for most households and disproportionately for lower-income households and can speed economic recoveries. However, doing too much can have serious downsides that might be difficult to mitigate.

Macroeconomic support for an economy deep in recession with many underused resources can increase output and employment with little effect on inflation. But as the economy gets closer to its capacity, additional macroeconomic support will feed increasingly into inflation instead of improvements in output and employment. Going forward, the magnitude and timing of the response should be improved through more automatic stabilizers, and the targeting of the response should be as well. The good news is such responses can be implemented efficiently if policies are developed in advance of a crisis.

Policymakers should take the lesson from the past two years that vigorous fiscal and monetary policy can boost income for most households and disproportionately for lower-income house-holds and can speed economic recoveries.

It is important to draw lessons not just from what happened, but also from what did not happen during the COVID-19 recession: for example, there was no financial crisis in the United States or worldwide. The initial, robust response by monetary policy-makers was critical to keeping the financial sector on an even keel. Better preparation in the form of more robust and stress-tested balance sheets for banks prior to the recession also helped.

The preexisting social safety net is inadequate in the face of recessions: it is not generous enough and has too many gaps, which is why it needed to be supplemented by policy action both in the Great Recession and to a much greater degree in the COVID-19 recession. Additional automatic stabilizers are likely part of the answer but are unlikely to be sufficient to avoid the need for well-timed and wise discretionary fiscal responses in the future.

It is still not clear what policies would work better in the United States to lessen the impact of a GDP decline on employment and preserve worker attachment to their employers. Job retention schemes were heavily utilized in European countries compared to state-based work sharing programs in the U.S.—these programs should be explored in greater detail for future downturns.

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The return of industrial policies Valentine Millot and Łukasz Rawdanowicz 31 May 2024

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The paper contributes to renewed debates about industrial policy in the context of recent initiatives in several OECD economies. It discusses the pros and cons of industrial policies motivated by environmental, national security and...

Long-term scenarios: incorporating the energy transition Yvan Guillemette and Jean Château 14 Dec 2023

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This paper describes the latest update of the OECD’s long-term scenarios, which are done every 2-3 years to quantify some of the most important long-term macroeconomic trends and policy challenges facing the global economy. For the first time, this...

Aiming better: Government support for households and firms during the energy crisis Yannick Hemmerlé, Enes Sunel, Filippo Maria D’Arcangelo, Tobias Kruse, David Haugh, Álvaro Pina, Mauro Pisu, Cassandra Castle and Giuliana Sarcina 06 Jun 2023

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Governments rapidly provided large support to help households and firms face the 2021-22 energy price crisis. Drawing on the OECD Energy Support Measures Tracker and country case studies, this paper documents countries’ policy responses and draws...

A framework to decarbonise the economy Filippo Maria D’Arcangelo, Ilai Levin, Alessia Pagani, Mauro Pisu and Åsa Johansson 04 Feb 2022

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Global progress towards tackling climate change is lagging. This paper puts forward a framework to design comprehensive decarbonisation strategies while promoting growth and social inclusion. It first highlights the need of evaluating a country’s...

Spurring growth and closing gaps through digitalisation in a post-COVID world: Policies to LIFT all boats Mauro Pisu, Christina von Rüden, Hyunjeong Hwang and Giuseppe Nicoletti 26 Nov 2021

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The full potential of digital technologies remains unrealised and their benefits unequally shared because of insufficient investment in enabling intangible assets and communication networks within and across countries. The COVID-19 shock poses new...

The long game: Fiscal outlooks to 2060 underline need for structural reform Yvan Guillemette and David Turner 19 Oct 2021

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This paper updates the long-term scenarios to 2060 last published in July 2018, with a special focus on fiscal sustainability and risks. In a baseline economic and fiscal scenario, trend real GDP growth for the OECD + G20 area declines from around 3%...

Synthesising good practices in fiscal federalism Kass Forman, Sean Dougherty and Hansjörg Blöchliger 14 Apr 2020

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The design of intergovernmental fiscal relations can help to ensure that tax and spending powers are assigned in a way to promote sustainable and inclusive economic growth. Decentralisation can enable sub-central governments to provide better public...

Fiscal challenges and inclusive growth in ageing societies Dorothée Rouzet, Aida Caldera Sánchez, Theodore Renault and Oliver Roehn 10 Sept 2019

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This paper was prepared in support of Japan’s G20 Presidency. It takes stock of ongoing and projected population ageing across G20 economies and its far-reaching implications for economic growth, productivity, inequality within and between...

Digital Dividend: Policies to Harness the Productivity Potential of Digital Technologies Stéphane Sorbe, Peter Gal, Giuseppe Nicoletti and Christina Timiliotis 12 Feb 2019

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This paper presents a range of policies to enhance adoption of digital technologies and firm productivity. It quantifies illustratively the effect of policy changes by combining the results of two recent OECD analyses on the drivers of adoption and...

Public finance structure and inclusive growth Boris Cournède, Jean-Marc Fournier and Peter Hoeller 17 Dec 2018

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Tax and spending reforms offer numerous opportunities to promote inclusive growth. There is potential for so-called win-win reforms that simultaneously boost economic output and enhance income equality. Other changes in the structure of public...

Tax Policies for Inclusive Growth Robert Hagemann 17 Dec 2018

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Against a backdrop of the widening income distribution in most countries, OECD governments need to formulate policies that support sustainable and inclusive economic growth. Tax policies play a crucial role in this endeavour. Both tax theory and...

Income redistribution across OECD countries Orsetta Causa, James Browne and Anna Vindics 14 Feb 2019

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Income inequality has increased in most OECD countries over the past two decades. This is both because market incomes (wages, dividends, interest income) have become more unequally distributed, and also because redistribution through taxes and...

The Long View: Scenarios for the World Economy to 2060 Yvan Guillemette and David Turner 12 Jul 2018

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This paper presents long-run economic projections for 46 countries, extending the short-run projections of the Spring 2018 OECD Economic Outlook. It first sets out a baseline scenario under the assumption that countries do not carry out institutional...

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Policies that spur more efficient corporate restructuring can revive productivity growth by targeting three inter-related sources of labour productivity weakness: the survival of “zombie” firms (low productivity firms that would typically exit in a...

Strengthening economic resilience Aida Caldera Sánchez, Alain de Serres, Filippo Gori, Mikkel Hermansen and Oliver Röhn 22 Apr 2017

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Considering the deep and long-lasting impact of severe recessions, such as the 2008-09 financial crisis, it is important that measures be taken to minimise the risk of such event. But in doing so the benefits need to be balanced against the potential...

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Reforms that boost growth by enhancing economic flexibility often meet strong opposition related to concerns that they may imply adverse consequences for categories of workers. This study investigates how making product or labour market regulation...

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World trade growth was rapid in the two decades prior to the global financial crisis but has halved subsequently. There are both structural and cyclical reasons for the slowdown. A deceleration in the rate of trade liberalisation post 2000 was...

Does Fiscal Decentralisation Foster Regional Convergence? Hansjörg Blöchliger, David Bartolini and Sibylle Stossberg 22 Sept 2016

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Across the OECD, GDP per capita is converging. In contrast, regional disparities – or differences in GDP per capita across jurisdictions – are rising, mainly as a result of widening productivity differences. Fiscal decentralisation could help reduce...

The Economic Consequences of Brexit Rafal Kierzenkowski, Nigel Pain, Elena Rusticelli and Sanne Zwart 28 Apr 2016

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Membership of the European Union has contributed to the economic prosperity of the United Kingdom. Uncertainty about the outcome of the referendum has already started to weaken growth in the United Kingdom. A UK exit (Brexit) would be a major...

Prudent debt targets and fiscal frameworks Falilou Fall, Debra Bloch, Jean-Marc Fournier and Peter Hoeller 01 Jul 2015

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The sharp rise in debt experienced by most OECD countries raises questions about debt indicators and the prudent government debt level countries should target. It also raises questions about the fiscal frameworks needed to reach the prudent debt...

Selected Essays on Economic Policy

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Carl menger on economic policy: “Exact laws,” institutional prerequisites, and economic liberalism

Paradigm shifts in economic theory and policy, the austrian episode.

• economic policy

Table of contents (24 chapters)

Front matter, introduction, ‘the end of a perfect day’: ‘horses for courses’ and policy proposals.

G. C. Harcourt

Background to Policy Recommendations

Theoretical controversy and social significance: an evaluation of the cambridge controversies, eric russell, 1921–77: a great australian political economist, on theories and policies, the mixed economy, taxation reform and investment incentives, investment allowances for primary producers.

• A. D. Barton

Taxation and Business Surplus

• J. W. Bennett

Investment and Initial Allowances as Fiscal Devices

Investment-decision criteria, investment incentives and the choice of technique, accounting conventions and policy, the quantitative effect of basing company taxation on replacement costs, incomes policy and the measurement of profits, the measurement of the rate of profit and the bonus scheme for managers in the soviet union, package deals, the social consequences of inflation, policy and responses for australia, authors and affiliations, jesus college, cambridge, uk, university of adelaide, australia, about the author, bibliographic information.

Book Title : Selected Essays on Economic Policy

Authors : G. C. Harcourt

DOI : https://doi.org/10.1057/9780230510562

Publisher : Palgrave Macmillan London

eBook Packages : Palgrave Economics & Finance Collection , Economics and Finance (R0)

Copyright Information : G.C. Harcourt 2001

Hardcover ISBN : 978-0-333-94632-9 Published: 26 January 2001

Softcover ISBN : 978-1-349-42636-2 Published: 26 January 2001

eBook ISBN : 978-0-230-51056-2 Published: 26 January 2001

Edition Number : 1

Number of Pages : XVI, 354

Topics : History of Economic Thought/Methodology , Economic Theory/Quantitative Economics/Mathematical Methods , International Political Economy , Economic Policy , Public Policy

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Economics Essay Examples

Ace Your Essay With Our Economics Essay Examples

Published on: Jun 6, 2023

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Short Essay About Economics

A Level Economics Essay Examples

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Economics Extended Essay Examples

In an economics extended essay, students have the opportunity to delve into a specific economic topic of interest. They are required to conduct an in-depth analysis of this topic and compile a lengthy essay. 

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• How does foreign direct investment impact economic growth in developing countries?
• What are the factors influencing consumer behavior and their effects on market demand for sustainable products?
• To what extent does government intervention in the form of minimum wage policies affect employment levels and income inequality?
• What are the economic consequences of implementing a carbon tax to combat climate change?
• How does globalization influence income distribution and the wage gap in developed economies?

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Macro Economic Essays

These are a collection of essays written for my economic blogs.

Exchange Rate Essays

• Effects of a falling Dollar
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Economic Growth Essays

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Fiscal Policy

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Monetary Policy

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• Benefits of High-Interest Rates (and recessions)
• Who Sets interest rates – Markets or Bank of England?

Economic History

• Economics of the 1920s
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General Economic Essays

• The Dismal Science
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• War and Recessions
• The Economics of Fear
• The Economics of Happiness
• Can UK and US avoid Recession?
• 3 Of the Worst Economic Policies
• Overvalued Housing Markets
• What Went Wrong with US Economy?
• Problem with Bailing out financial sector
• Problems of Personal Debt
• Problem of Inflation
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• How To Survive a Recession
• Can A recession be a good thing?

Chinese Economy

• Problems of Chinese Economic Growth
• Should we worry about a strong China
• Chinese Growth and Costs of Growth
• Chinese Interest Rates and Economic Growth

Model essays

• A2 model essays
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• Funny Exam Answers
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Economics Revision Essay Plans

Last updated 17 Dec 2019

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Why Do Governments Intervene?

• How Do Governments Respond?

The Federal Reserve System

• Achieving Financial Stability
• Government Policy FAQs

The Bottom Line

• Government & Policy

What Impact Does Economics Have on Government Policy?

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Economic conditions often inform the policy changes that governments elect to enact. Specifically in the United States, government policy has always had a large amount of influence on economic growth, the creation of new business entities, and the success of financial markets.

In the broadest sense, a country's economic activity reflects what people, businesses, and governments want to buy and what they want to sell. Because the U.S. has a capitalist economy that relies on the principles of a free market, theoretically, it is primarily the decisions of consumers and producers that mold the economy.

Key Takeaways

• Economic conditions often inform the policy changes that governments elect to enact.
• In the U.S., government policy has always had a large amount of influence on economic growth and the creation of new business entities.
• For those in political power, having a track record of economic growth is often an important consideration (especially if they are in a position of seeking re-election).
• To ensure strong economic growth, there are two main ways that the federal government may respond to economic activity: fiscal policy and monetary policy.
• In the U.S., the Federal Reserve System directs the country's monetary policy.

The government may decide to regulate some aspects of economic activity in order to engineer economic growth or prevent negative economic conditions in the future. In general, a government's active role in responding to and influencing the economic circumstances of a country is for the purpose of preserving and furthering the economic interests of the general public.

For those in political power, having a track record of economic growth is often an important consideration (especially if they are in a position of seeking re-election). In the U.S., many studies have shown that the economy is a major factor that affects how people vote (specifically in the U.S. presidential election). Strong economic growth typically translates to high job creation, stronger wage growth, better financial market performance, and higher corporate profits.

How Do Governments Respond to Economic Activity?

To ensure strong economic growth, there are two main ways that the federal government may respond to economic activity: fiscal policy and monetary policy .

Monetary Policy

One of the most common ways that a government may attempt to influence a country's economic activities is by adjusting the cost of borrowing money. This is most often done by lowering or raising the federal funds rate , a target interest rate that impacts short-term rates on debt such as consumer loans and credit cards. The Federal Reserve increases the federal funds rate to constrict economic growth and decreases the federal funds rate to encourage economic growth.

Another form of monetary policy is the act of the Federal Reserve buying and selling government securities. When the Fed buys a security from a bank, it increases the money supply by injecting funds into that bank. Alternatively, it can sell securities to remove cash and decrease the money supply.

Monetary Policy Example

In response to the COVID-19 pandemic, the Federal Reserve quickly reduced the federal funds rate to 0%. By setting prevailing interest rates very low, the Federal Reserve attempted to support economic activity, maximize employment, and meet price stability goals.

Fiscal Policy

The government may also enact policies that adjust spending, change tax rates, or introduce tax incentives. In regard to government budgets, the government identifies whether or not it wants to spend more money than it anticipates collecting. This process of evaluating public spending aims to promote economic prosperity or cool an overheated economy.

Instead of focusing on how the government spends money, common fiscal policy revolves around how the government collects money. Offering tax incentives, additional tax credits, or lowering tax rates decreases the economic burden on citizens and promotes economic growth. Striking down favorable tax laws or increasing taxes slows economic activity.

Fiscal Policy Example

In response to the COVID-19 pandemic, the Federal government awarded economic impact payments (i.e. stimulus checks) to qualifying Americans. The government directly sent eligible individuals money to promote economic activity and encourage household spending.

Fiscal and monetary policies are both intended to either slow down or ramp up the speed of the economy's rate of growth. This, in turn, can impact the level of prices and the employment rate in the country. However, there are subtle differences between these two types of government action.

Differences Between Government Policies

Change in the money supply or how easy credit is to obtain

Adjustment in federal funds interest rates or money supply

Set by Central Bank

Heavily independent of the political process

Impacts debt industries like housing market

Change in how the existing monetary supply is utilized

Adjustments in government spending and tax rates

Set by Federal Government

Heavily integrated with political process

Impacts government budgets/net deficits

In the U.S., the Federal Reserve System directs the country's monetary policy. The Federal Reserve System—also called "the Fed"—is the central bank of the United States. Established in 1913 by Congress, the Fed controls the money supply and actively uses policy to respond to and influence economic conditions.

The Fed adjusts the interest rate that banks charge to borrow from one another. (This cost is then passed onto consumers.) The Fed may lower the interest rate to keep borrowing cheap, ensure that credit is widely available, and boost consumer (and business) confidence. Conversely, the Fed may decide to raise interest rates in a strong economy, or in response to inflation concerns—the increase in prices that occurs when people have more to spend than what's available to buy.

In the two ways governments can intervene in the economy, you'll note that monetary policy is set by the Federal Reserve, an independent entity technically not part of the Federal government. On the other hand, fiscal policy requires political intervention and majority approval (for items not issued by executive order by the President).

Achieving Financial Stability in the U.S. Economy

Prior to the creation of the Fed in 1913, the U.S. had experienced several severe economic disruptions as a result of massive bank failures and business bankruptcies. As an institution, the Fed was tasked with ensuring financial stability in the U.S. economy.

After the Great Depression , the greatest threat to the stability of the U.S. economy was recessionary periods: periods of slow economic growth and high unemployment rates. In combination, these two factors created a sustained period of decline in the gross domestic product (GDP). In response to this, the government increased its own spending, cut taxes (in order to encourage consumers to spend more), and increased the money supply (which also encouraged more spending).

Beginning in the 1970s, a different economic reality emerged. This expansionary economy with substantial money supply growth led to a sustained period of a high level of inflation. In response to these economic factors, the U.S. government started focusing less on combating recession and more on controlling inflation. Thus, the government enacted policies that limited government spending, reduced tax cuts, and limited growth in the money supply.

At this time, the government also shifted away from its reliance on fiscal policy—the manipulation of government revenues to influence the economy. The fiscal policy did not prove effective at addressing high levels of inflation, high levels of unemployment , and vast government deficits. Instead, the government turned to monetary policy—controlling the nation's money supply through such devices as interest rates—in order to regulate the overall pace of economic activity.

Since the 1970s, the two main goals of the Fed have been to achieve maximum employment in the U.S. and to maintain a stable inflation rate. This dual mandate is difficult to achieve; by combating one of the goals, it becomes more difficult to fight the other.

While outside events may influence economic activity, governments use economic means to enact changes as they see fit. This may include changes to tax policy, adjustments to the federal funds rate, fluctuations in the money supply, or alternations to government spending.

Should the Government Intervene in the Economy?

Whether or not the government should intervene in the economy is a deeply-rooted philosophical question. Some believe it is the government's responsibility to protect its citizens from economic hardship. Others believe the natural course of free markets and free trade will self-regulate as it is supposed to.

Why Might the Government Intervene in the Economy?

The government has an inherent interest in protecting the well-being of its citizens. Due to prevailing conditions in the world, the government might see fit to enact certain legislation to preserve the quality of life for its citizens. The government might also enact legislation to promote economic well-being and equity across different socioeconomic classes.

What Are Some Ways the Government Intervenes in the Economy?

The government has two primary ways of interacting with the economy. Through monetary policy, the government controls prevailing interest rates and makes obtaining debt easier or harder. Through fiscal policy, the government controls spending levels and how to allocate resources.

Keynesian economic theory holds that governments should hold their citizens out of a recession. Governments do this by enacting monetary and fiscal policies. By having a central bank (i.e. the Federal Reserve), the United States has the ability to manipulate economic policy in an attempt to intervene when appropriate.

U.S. Department of State. " U.S. 2022 Midterm Elections: Role of the Economy in Elections ."

Sage Publications. " Economic Perceptions and Voting Behavior in US Presidential Elections ."

Federal Reserve Board. " Monetary Policy Principles and Practice ."

Federal Reserve Board. " Federal Reserve issues FOMC statement, March 15, 2020 ."

Internal Revenue Service. " Economic Impact Payments: What You Need to Know ."

Federal Reserve Board. " What Is the Purpose of the Federal Reserve System? "

Federal Reserve History. " The Great Inflation ."

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Economic Policies in The Global Economy Qualitative Research

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The recent spate of economic recession in the global economy and eventually national economy has prompted policymakers to consider diverse aspects of expansionary economic policies. To some extent, policymakers have adopted policies that can be considered unconventional and highly aggressive in hope that desirable economic conditions can be obtained.

Whereas monetary policy has been used to ease quantitative pressures, fiscal policies have attempted to reduce taxes and increase government spending. There have been widespread changes in the way economists view the efficacy of discretionary policies by the Federal government since the publication of Keynes’s work of ‘General Theory’ (Keynes).

Indeed, the experiences of the 1930 depression and the subsequent World War II brought about consensus amongst economists about the importance of fiscal multiplier effect. Furthermore, it became apparent that expansionary economic policies were important in sparking business cycle in an economy through contraction of economic downturns.

Numerous historical experiences served as important aspects of opening up the economic understanding about the importance of monetary and fiscal policies in enhancing economic growth and revival from recessionary effects. For instance, the 1960s and 70s revealed to economists that monetary policy was an important component of economic performance.

Furthermore, the experiences of 1970s and 80s opened up the understanding about the importance of supply-side of expenditure and tax policies and how they affected the economy. Indeed, carefully developed monetary and fiscal policies can ultimately salvage an economy in depression and recession.

Bureaucracy within emerging markets can be defined as the study of roles and functions of government departments and agencies. It also encompasses the association between the various government bodies and important national arms such as the Judiciary and Legislature. Additionally Bureaucracy defines the institutional set-up as well as the conduct of the various government departments.

Max Weber (1947) argued that in a bureaucratic system there needs to be separation of tasks, qualified man power with distinctive skills, a well defined institutional arrangement that depicts a clear chain of command; with each unit having its unique obligations, and finally there should be elaborate regulations that define the channels of power and ensures responsibility.

The first analysis of the American Bureaucracy is attributed to three individuals, Goodnow, Gulick and Taylor.

Although Goodnow acknowledged that it is difficult to detach politics from governance he believed that the two can function outside of each other and as such advocated for their separation. The separation of roles brought about certain achievements; there was a deliberate attempt to research and execute bureaucracy in a methodical way.

In the meantime attention was drawn towards the planning of administrative agencies that would create, embrace and execute guidelines. There were also attempts made towards unearthing the best practices of governance, discovering the most effective means of creating labor procedures and defining the institutional composition.

The idea of creation of labor procedures is mostly associated with Fredrick W. Taylor (1919) who had done a number of trials to conclude on how labor should be organized.

The separation of duties was vital with top administrators tasked with defining roles and their subordinates mandated to respond to the roles as discharged. There was a shift in focus from all procedures entailed in achieving desired outcomes to other essential factors.

Fiscal policy and expansionary policy

Prior to the 1930s, classical economists were of the opinion that there was no need for government intervention in economic downturns as the economy would eventually adjust. Therefore, the government was to assume nothing was wrong and wait for the economy to correct itself without any interference.

Nevertheless, the subsequent massive negative economic downturns of the 1930s and WWII prompted policymakers to rethink their stand (Hemming et al.). Thus economic policy intervention was given some serious thoughts. The enactment of fiscal policy is often through the Congress and the White House. It particularly seeks to make adjustments in the level of government spending as well as the level of taxation.

Economic slowdowns often attract expansionary fiscal policies. Consequently, there are increases in the level of government spending and also reductions in the level of taxation.

The classical economists were the earliest to make an attempt towards the development of a theoretical framework through which aggregate demand could be explained. Similarly, classical macroeconomists offered a good background through which Keynes developed his economic findings.

Keynes in reaction to the classical approaches towards economic depressions and recessions was motivated by the apparent failure of the classical arguments. Various aspects of the classical economists especially during recession and depression showed that nothing would restore the economy back to the path of growth (Keynes).

For instance, Keynes criticized the manner in which classical macroeconomists presented their views about velocity of money and other economic aspects of depression and recession. According to Keynes, government was an important player in the process of correcting economic depression and recessionary pressures.

Certain economic declines during depression and recession such as continuous unemployment could only be hastened towards recovery through government intervention. Keynes identified various aspects necessary for the increased employment.

To start with, Keynes argued that production level had a direct relationship with output. Secondly, he argued that planned expenditure level for businesses in the economy affects the production level (Keynes). Additionally, Keynes argued that employment in the economy is dependent on the level of expenditure.

From the background of expenditures and taxation level, it is evident that the federal government can greatly influence the rate at which the economy moves from recession and depression. The federal government can undertake discretionary fiscal policies with the aim of applying government spending and taxation to salvage the economy from recession (Hemming et al., 2002).

Indeed, a change in government is not always associated with corresponding change in the fiscal policies. However, the application of discretionary fiscal policy by the federal government during depression and recession often results to expansionary condition.

The motivating factors for businesses and households are normally selfish. Therefore, it is impractical to expect households and businesses to undertake actions for social benefit without corresponding gain (DeLong et al.).

Consequently, firms and households do not swim against the tide during recession by investing more and increasing consumption respectively. Instead, there are massive increases in saving level by households and less spending as well as reduced investment by firms.

When the federal government undertakes fiscal expansionary policies, people are upbeat about positive outcomes in the future such as job security, increased profits and sales as well as pay rises. As always, firms and households also swim with the tide thus stimulating economic growth towards full employment.

The functioning of expansionary fiscal policy by the federal government is associated with three main economic functions (DeLong et al.). The first important factor to be considered for the expansionary fiscal policy is Aggregate demand. Normally, fluctuation in investment, spending and net exports affects aggregate demand.

Owing to the power of the multiplier effect, the changes in income, employment and output become higher than the initial adjustment. The main objective of applying expansionary fiscal policy is to affect the aggregate demand curve by shifting it as well as increasing the level of equilibrium and eventually the GDP (Hemming et al.).

Additionally, the federal government needs to first establish the desired level of national income before deciding on the extent of fiscal policy to undertake. Therefore, the recessionary gap is bridged through expansionary fiscal policies aimed at attaining full employment.

Expansionary Monetary Policy by the Federal government

Whereas fiscal policies are undertaken by the Congress and the White House, monetary policies are undertaken by Federal Reserve. The Federal Reserve often undertakes changes in the supply of money in the economy. In fact, the Federal Reserve often undertakes various measures aimed at restoring the economy in recession to normalcy or better performance.

Various changes in monetary policy such as the federal bank rate can have profound implications on the economy (Federal Reserve Bank). Federal funds rate has serious impacts on the market interest rates on various financial commodities such as auto loans, mortgage as well as bond rates.

Periods of economic recession require expansionary monetary policies to be adopted by the Federal Reserve. Therefore, there is a lowering of the Federal funds rate leading to various economic incentives to the firms. Consequently, firms are motivated to hire more workers coupled with increased investment. On the other hand, there is a general increase in the level of consumption by the households.

Various measures are often adopted by the Federal Reserve in creating expansionary monetary policy. For instance, the Federal Reserve has a responsibility of increasing or decreasing the reserve ratio. The Federal Reserve usually determines total amount of money to be held by financial institutions (Keynes). During expansionary policy, the reserve ratio is reduced.

This creates credit due to availability of excess reserve by banks. At the same time the level of money supply is determined by interest rates charged. Household spending also increases due to the increased money supply as well as aggregate demand. The availability of credit encourages investment thus increase in GDP as well as employment.

Expansionary monetary policy can also be undertaken though the increase in discount rate for the Federal bonds as well as open market operations. By increasing the discount rate, the Federal Reserve encourages bondholders to sell (Federal Reserve Bank). Consequently, there is an increase in money supply. Furthermore, the Federal Reserve can buy back the available government bonds and securities from the public.

These two expansionary policies are aimed at increasing money supply in the economy. Money supply increases aggregate demand level as spending by households increases while investment by firms increases too. There is an increase in employment level through the multiplier effect leading to increase in GDP.

The Federal Reserve is always an important player in the economy. It is no wonder that the actions of the Federal Reserve are monitored closely by economists, businesses, politicians as well as households with keen interest (Keynes).

The action of the Federal Reserve in increasing money supply affects both households and firms. Thus firms have extra money to undertake further investment while households have extra money to spend. These situations are important for economic growth through increased employment and aggregate demand. The outcome of these situations is a growth in GDP of the nation.

From the foregoing, it is evident that interplay of expansionary fiscal policy and expansionary monetary policy has immense positive impact on the economy. Whereas fiscal policies are undertaken by the Congress and the White House, monetary policies are executed by the Federal Reserve and have an objective of increasing money supply during recession.

The main focus of expansionary policies in an economy during recession is an increase in aggregate demand and employment level eventually stimulating economic growth in terms of GDP. Indeed, carefully developed monetary and fiscal policies can ultimately salvage an economy in depression and recession.

Economic development in GCC Region

The Gulf Co-operation Council (GCC) region has experienced profound social and demographic changes in the past few decades. Indeed, the trend is set to continue for the next decade or so. Consequently, serious questions on various issues such as immigration policies, labor, adequacy of public services and infrastructure as well as the role of women have been raised.

The GCC is increasingly becoming a region of utmost economic significance globally. This trend is undoubtedly envisaged to continue since the regions collaborates equitably with other markets based on investment trade and other economic activities.

Indeed, the 21 st century has become a period of advanced economic growth and development in the GCC region. The period has seen enormous infrastructure expansion coupled with economic development of the region.

The 21 st century has witnessed massive construction of major skyscrapers in the region. For instance, the Burj Tower in Dubai became the World’s tallest building in 2007 at a height of 800m. The economic boom in the region has been associated with numerous factors. Firstly, the region has massive accumulation of private and public sector capital which is readily availed by high revenues from natural gas and oil (Duke).

Similarly, the GCC region has continued to become a haven of peace and stability hence the creation of an environment favorable for business. Therefore, infrastructure projects worth billions of dollars have come up. The region has seen creation of natural islands such as Palm Jebel Ali.

Moreover, the immense wealth and peace has attracted people and firms from all corners of the world. Consequently, demand for various infrastructure and services such as banking, office, housing, entertainment and other amenities has led to further explosion of economic development in the region.

Economic development refers to the advancement of all aspects of an economy in a progressively sustainable manner. Therefore, economic development leads to wholesome growth of all sectors of an economy leading to lasting positive consequences. This is exactly the experience in the GCC region at the moment. The economic development of the region has made it a focal point of the global economy (Habibi).

Details of the extent of economic development of the GCC region reveal an increasing dependence of various global economies on the GCC region. In particular, the GCC region has established a strong partnership with China and India. China and India are very important strategic customers for GCC region’s oil. On the other hand, GCC region is a reliable supplier of oil to meet the needs of China and India.

Recent statistics reveal China and India were the largest trade partners to UAE in 2011. Furthermore, increasing trade volumes are being registered between the Arabian Peninsula Monarchies with India and China.

Academics have tried to debate on the role of exports towards the attainment of economic development in a region. The GCC region has not been exhaustively discussed in terms of its economic development brought about by massive endowment with oil and other natural resources (Harb). Studies have established that a strong link exists between trade and economic growth and development.

The GCC region has been able to cheat the Dutch disease often associated with massive export of natural resources. Therefore, the region is experiencing massive industrialization due to the existence of appropriate mechanisms to compensate the absence of labor.

Indeed, the GCC economy has been developing tremendously due to the availability of all the factors of production. Therefore, the region’s balance of payments has not deteriorated in any away. The outcome is a progressively developing economy.

Eurocurrency market

A Eurocurrency deposit is a deposit with a bank in the currency of a country which is not the country in which the bank is located, e.g. the deposit of sterling pounds with a bank in USA or a deposit of US dollars with a bank in UK. Most banks deposits of currency outside the country of the currency’s origin are in US dollars and so the term “eurodollars” is occasionally used to describe all euro-currencies.

The euro-currency market describes the depositing and lending of euro-currencies. In other words, the euro-currency markets are international money markets in which; banks obtain deposits of foreign currencies and re-lend them, often to other banks; or banks borrow euro-currencies from other banks and then re-lend them.

Euro-zone Monetary Performance

International capital markets

Larger companies may arrange borrowing facilities from their bank, in the form of bank loans or bank overdrafts. Instead, however, they might prefer to borrow from private investors by issuing Eurobonds.

Eurobond refers to a bond issued in a capital market denominated in a currency which often differs from that of the country of issue and sold internationally. Eurobonds are therefore, long-term loans raised by international companies or other institutions in several countries at the same time.

The interest rate on a eurobond issue may be fixed or variable (floating rate bonds). Many variable rate issues have a minimum interest rate which the bondholders are guaranteed, even if market rates fall even lower. These bonds therefore, convert to a fixed rate when market rates fall to the minimum interest rate.

An investor subscribing to a bond issue will be concerned about; Security where the borrower should be of high quality. Marketability, where investors wish to have a ready market in which bonds can be bought and sold. The return on the investment as indicated by the coupon interest rates.

Types of eurocurrency loans

The types of eurocurrency loans available are:

Fixed Interest loans, which is usually a medium term loan of up to 5 years. The borrower knows in advance what his interest payments will be.

Roll over (variable interest rates) loans. These are loans whereby the bank agrees to provide finance to the borrower for a given period but the interest rate on the loan is subject to renegotiation at pre-arranged intervals of every 3 or 6 months.

Stand by credit: This is an overdraft facility offered by a bank to its customers in a eurocurrency. The bank charges an agreed interest rate together with a commitment fee of about 1% for funds made available to the customer under the credit, but which he then fails to draw.

Syndicated credit, which are large Eurocurrency loans put together for a single customer by a syndicate of banks, usually for a longer term than the Eurocurrency loans.

The customer approaches a bank for a loan and if the bank is unable or unwilling to provide all the loan itself, it can arrange, by means of a placement memorandum, for a number of other banks to contribute to the loan as a member of a syndicate. The bank which sets up the syndicate is known as the managing bank

Euro commercial paper (or euro notes): This is a short-term financial instrument; Issued in the form of unsecured promissory notes with a fixed maturity of up to one year, Issued in bearer form, Issued on a discount basis (so the rate of interest) on the commercial paper is implicit in its sales value). The eurocommercial paper is denominated in any currency – usually a hand currency.

Factors to consider when choosing between euromarkets or domestic markets

The currency that the borrower wants to obtain is one of the considered factors. Multinational companies usually want to borrow in foreign currency to reduce their foreign exchange exposure and therefore borrow in euromarkets rather than the domestic market. There is often a small difference in interest rate between eurocurrency and domestic markets.

On large borrowings, however, even a small difference in interest rate result in a large difference in the total interest charged on the loan. It may be possible to raise money on the euromarket more quickly than in the domestic markets.

Also security is involved, where Euromarket loans are usually unsecured, whereas domestic market loans are more commonly secured. Large borrowers may therefore prefer euromarkets. Finally, the size of the loans; It is often easier for a large multinational to raise very large sums on the Euromarkets than in a domestic financial market.

Exchange Rate Arrangements, 2008—2012

(Percent of IMF members as of April 30 each year)

Major economic powerhouses are expected to continue controlling the market in the year 2013. However, credit Suisse anticipates that most policy makers from emerging markets, especially those dealing with fix exchange rates at times applies inappropriate measures. Variuos reports on currency anticipate the same inappropriate measures within various markets.

However, nature of competitive strategy applied enables adequate realization of stated company objectives. Porter tries to justify this point by embarking on the potential theoretical concepts associated with how a firm would achieve its competitive position in its industry or marketplace.

As long as competitive advantage is a primary consideration, there is a relevant truth pertaining to the ultimate capacity of competitive strategies to help an organization realize its prevailing plans and objectives, as it could be either defensive or offensive actions that could ensure defendable position in the industry (Porter 34).

The existence of competitive strategies is common everywhere today because of the tough competition, particularly in the realm of business.

Strategic entrepreneurship is one detailed subject in this area, where strategic management perspectives are present in order to pursue sound and excellent entrepreneurship for an existing firm’s competitive advantage, the very reason why many studies surfaces in order to understand why other firms generated successful performance and others do not (Rezaian and Naeiji 3).

Strategic entrepreneurship is a common theme especially in the age of global economy, by which the organizations have the chance to explore a vast stretch of market area. Competition has become so tough, but one has to find way out by securing a move towards strategic entrepreneurship hence achieving competitive advantage.

This is relevant to some existing companies at present where they initiated global strategic alliance for instance in order to define more critical point of doing entrepreneurship that would make a difference in their industry or specific market niche.

They have strong orientation towards competitive advantage and wealth creation (Rezaian and Naeiji 4). Concerning this point, innovation in entrepreneurship has therefore become a new existing area for exploration in the field of strategic management (Oliver 7).

The bottom line of some firms’ ultimate move for competitive strategies is to increase their market share, which in general is an essential indicative factor of the achievement of competitive advantage.

Competitive strategies for the achievement of competitive advantage have long been an essential topic in the business world, because when investors and stakeholders employ them they would have the opportunity to possess a strong hold in the market, particularly when they generate their competitive edge, create wealth, initiate product leadership and achieve financial and economic return (Luke, Kearins and Verreynne 314).

They would have the chance to initiate intense force that at some point would try to create a remarkable impact on their prevailing competitors, rival firms and the new market entrants. It is for this reason that studying competitive strategies and competitive advantage and integrating them into the concept of strategic entrepreneurship has triggered substantial attention.

Many studies have already set for further explorations regarding this concern (Rezaian and Naeiji 3). These studies have promoted us with some essential suggestions at the entrepreneurial level.

A vast red ocean has become widely explored based on Porter’s relevant basis of formulation of competitive strategies, for outperforming competitors (Porter 34). As many key players try to take part of the competition in an industry, there is a high inclusion of competitive strategies (van Rensburg 15). Innovation for instance has become the major key indicator of formulating competitive advantage (Oliver 7).

For instance, the highly differentiated offerings are positive indications of a marketplace with major key players who are after of creating a significant market share. This happens in many industries where their ultimate goal is to add substantial value for their customers and the target potential market.

In the same way, the existence of strategic entrepreneurship is a way used by investors and stakeholders in order to promote more value for their product or service offerings, as they continue to pursue to achieve remarkable differentiation and gain customers’ loyalty and trust. The result would be the creation of potential value for their target markets as they continue to provide them with their product or service offerings.

This study seeks to create a meaningful connection between strategic entrepreneurship and the creation of competitive advantage in the midst of a dynamic environment where competitors are trying to move ahead. Their ultimate goal is to create meaningful value for the society.

However, the creation of such value is a remarkable area of investigation particularly if there is a strong connection that would link it to a firm that has generated competitive advantage.

This is a major point that would require substantial investigation especially in today’s time when firms have to face the truth that competitive strategies at the entrepreneurial level would have the potential to bring them forward to competitive advantage or not, an essential field of study requiring addition of fundamental empirical evidence.

Financial Capital

Financial capital is the ultimate need prior to establishing a successful move forward to entrepreneurship within global market (Kariv 203). Every firm has individual needs when it comes to financial concerns. Financial capital could indicate the level of growth that a firm should initiate because at the bottom line every business requires to have it enough to start.

Without sufficient financial capital, it is hard to promote a successful business that would last and ensure its competitive advantage. For instance, it is hard for every firm to expand without the need to consider financial concerns. In fact, many firms are willing to go for expansion, but the bottom line is that they are not able to do so right away because of the associated cost of such activity.

They would only look forward to invest if they would be able to see remarkable opportunity that they think would bring them to a competitive edge. For this reason, financial capital is strongly associated with other relevant concerns in the making of value.

In the case of companies trying to promote differentiation strategy for their competitive advantage, financial capital is at the forefront of their plan. Financial capital would help them sustain their business above any other considerations. For this matter, many firms try to first enhance their financial capability.

In fact, one of their ultimate goals is to incur substantial revenue in order to acquire remarkable profit that would allow them to sustain their business in the end and become a cut above the other.

There is therefore an implication that the creation of value has corresponding relevant connection to the financial capital of a certain firm. This therefore calls for a relevant move for every firm to initiate relevant strategies that would make them a cut above the other in terms of their financial concerns.

Social capital is another consideration in order to create value and formulate successful competitive advantage (Bartkus and Davis 205). This requirement is a relevant component for the emancipation of relevant message and information linked up with a certain product or service offerings.

This requirement allows every firm to establish the appropriate channel in order to promote a relevant social network that would help establish the creation of its name together with its product and service offerings. Social capital is a necessary requirement because many firms need to establish identify for their entire business.

The establishment of their name alone is a remarkable competitive advantage because this could generate potential benefits. For instance, the creation of brand has proven to be effective especially in ensuring a remarkable market share. There is value associated with the brand name in the first place (Porter 85).

It could be intrinsic value, but the bottom line is that one could transform it into a monetary value. This is the reason why social capital is necessary because there is a need for creating a channel that will socially enhance the firm’ created product and service offerings.

Another important requirement is the human capital. For many years, the human resource has become a substantial consideration particularly in the creation of certain product or service offerings. The human resources are the ones to perform the plans and ensure that they have executed it well for the creation of value.

In an organization, the human resource is the best asset because the fulfillment of organizational plans lies on their ability to implement or execute the moves for the achievement of goals. This is due to the point that human capital tries to define the link between HR practices and business performance (Armstrong 81).

Resource orchestration

Based on the above discussion of the required resources in order to ensure competitive advantage, resource orchestration is a fundamental move that would eventually process all resources accordingly in order for the firm to produce certain output that is heading forward to differentiation applied in its prevailing product and service offerings.

This company tries to invest in its technology and from time to time produces new potential offerings primarily to those potential customers.

Apple changes the face of mobile phones and invents the latest development for smartphones. Smartphones come in different variants, but Apple creates a design that is unique and highly differentiated from other prevailing offerings coming from the production of other key players in the industry.

Concerning this potential move, Apple is able to promote a specific name for its brand, which has a remarkable competitive advantage in its industry. It allows the firm together with its brand to achieve high recognition from its potential customers and target market niche across the global marketplace.

The global strategic alliance between General Motors and Peugeot is another relevant proof that firms continue to engage in strategic entrepreneurship. There are remarkable reasons why GM and Peugeot together have determined to go into a global strategic alliance. In the prevailing trending in the car manufacturing industry, the economic factors have strong influence on the returns every car manufacturer produces.

This has evidently pulled the trigger and allowed the two firms to look for other sustainable strategies that would lead them a cut above the other car manufacturers. For this reason, GM and Peugeot, with primarily the same intention, agreed to initiate actual global strategic alliance, which is the first in their industry.

GM, renowned in its market in the US and in the other parts of the world, continues to face a remarkable challenge when it comes to the amount of profits and revenue it produces.

Firms engaging in strategic entrepreneurship

Various firms try to engage in strategic entrepreneurship. In this section, we would be able to take a closer look in each of their individual case. Many firms try to engage in strategic entrepreneurship. This is evident in the case of Apple Incorporated by which their ultimate goal is to provide highly differentiated product and service offerings that could ultimately stand as a cut above the other (Apple Incorporated).

In many cases, Apple Incorporated became a trendsetter and recognized as such, because its innovative products proliferate in its industry and have become the leading sources of modeling opportunity for a vast stretch of opportunity for customer acceptance.

Apple Incorporated primarily employs one of Porter’s generic competitive strategies and that is its combined focus the same way, Peugeot builds up a substantial reputation in the European market.

With their current strategic move, here are some important strategic advantages they might have eventually obtained, considering the point that each of these firms have created potential market share across vast geographic considerations, combining their potential would eventually extend their total coverage together, increasing their opportunity to cover and explore a huge market together.

In addition to that, GM and Peugeot would be able to save on associated cost when it comes to production due to the following reasons (BNP Media; BBC News).

Combining the available resources of GM and Peugeot would also mean expansion of their coverage to look for available raw materials. This would eventually allow them to have potential strong market power because one could consider them a huge and giant firm as user of raw materials.

They have strong demand, which would allow various sources to consider them as significant priority. This would also increase the chance for GM and Peugeot to save cost because they have a strong market power to suggest a certain price for raw materials. This would even allow them to combine their various sources of raw materials, leading them to have various options.

The two firms’ global strategic alliance is not only about integrating their resources. It is also about trying to combine their technology and implement researches and studies together to ensure more improve quality and design of their product offerings. The bottom line of this move is to establish a certain value for the two firms to experience a competitive advantage.

This means that the two firms, by combining their capacities in the car manufacturing activity are trying to promote the idea that they would want to produce high quality for product offerings. Another essential point why GM and Peugeot agreed for global strategic alliance is for them to be able to experience lower cost in the actual production and distribution of their product offerings.

With their new prevailing system for production, GM and Peugeot would be able to experience substantial reduction of cost along the value chain.

This means that these two firms are also employing overall cost leadership, by which the bottom line is for them to take control of a highly competitive product price without compromising the level of revenue and eventually profit.

The essential moves of GM and Peugeot are certain that they aim to achieve competitive advantage, by being able to create substantial moves that will lead them to provide high value for their target market and customers.

McDonald’s is an international food chain that has thousands of outlets across the globe. This company provides product offerings that are based on what the customers exactly want and need. This means that they provide products that at some point may have considerable diversification because they also tries to establish the point of catering the prevailing cultural need when it come to foods across their vast marketplace.

For instance, McDonald’s in India does not serve beef even if in its other outlets outside the country it has become its primarily fast-moving product offering. This means that the firm eventually tries to seek the opportunity to cater the worldwide market by trying to act in a local context (McDonald’s).

It cannot undergo a certain move to centralize its production of offerings because there are many factors to consider beforehand. These include culture and other relevant heritage associated with the existence of a prevailing civilization or society particularly in the mobile communication gadgets (Apple Incorporated).

This at some point could be its temporary competitive advantage as other firms are trying to emulate and even create much better design in the future. Apple therefore has been setting the trend, but its competitors are also doing relevant move for them to earn relevant market share and dominate in the marketplace.

The case of GM and Peugeot is new in the car manufacturing industry. However, there is one bottom line of their linked up move to finally take the plunge into the global strategic alliance and that is to obtain a remarkable competitive advantage (BNP Media; BBC News). These two firms are trying to initiate a move that is the first in their industry.

This means that they are trying to perform what is unique and as they head towards trying to become sustainable when it comes to their operation and other relevant matters. However, it is clear that these two firms are trying to promote sustainable competitive advantage.

Nevertheless, based on Oliver’s idea, it is hard for them to achieve sustainability with their competitive advantage because there are many firms today that could actually emulate their recent strategic move.

For this reason, Oliver has become the ultimate proponent of the idea that there is only temporary competitive advantage, a term that specifically holds true when it comes to the recent level of competitive advantage of a certain firm.

For Oliver, the associated corporate learning in line with the relevant competitive advantage could be the ultimate advantage of GM and Peugeot in their industry because these two firms would try to combine their effort in learning things just for them to come up with highly innovative product offerings in the market.

Firms could implement strategic entrepreneurship leading them to establish competitive advantage. At this point, let us take a closer look once again how some companies we mentioned in the previous discourse have established competitive advantage.

Incorporated Cases

Apple engages in strategic entrepreneurship and as a result, it earned the opportunity to establish its competitive advantage. What is the ultimate competitive advantage of Apple Incorporated may be its potential learning that has its application primarily on the production of highly innovative and differentiated product offerings and customer service (Apple Incorporated).

The firm tries to invest deeply in the creation of new technology because it has the belief that the introduction of something new into the market will pave the way for its remarkable strength in the marketplace.

This according to Porter is a significant move that will have to help initiate competitive forces in an industry. For as long as Apple continues to display its vibrant dominance in the ongoing competition in its industry, we could always have a clear word concerning its business that it has successfully established its competitive advantage at some point.

This does not mean this is going to be forever, because according to recently discussed concept, competitive advantage may not be entirely sustainable because of the ongoing innovation and other relevant strategic moves that every competition firm tries to initiate.

This therefore means that the trending Apple showcases today may not necessarily be the same trend in the future because of the other relevant moves of differentiation and innovation initiated by the other potential key players and new market entrants in the marketplace.

Apple today has remarkably gained its competitive advantage aside from its leading vibrant ideas, but through this output, this firm is able to set the trending in technology. Players in the same industry are its brand name. This brand is unique, and one of its kind.

However, its strategic moves may not be that unique at all knowing the fact that there are many key players trying to imitate what it has already started.

Aside from the fact that this firm establishes its name in the international context, it is also able to promote the idea of trying to serve its target customers with the product they deserve under the local context. For this reason, this firm has the chance to serve its customers with the appropriate product service offerings that they need and deserve to acquire.

Successful firms have various stories to tell, but one essential message they could provide us concerns the information on how they have made it to the top today. They may have started out from a very humble inception, but the result might be stunning as they might be the top key players now in their respective industries or chosen market niche.

Some of these firms employed strategic management moves. Strategic entrepreneurship could not be too far from these, as there are various firms trying to establish themselves at present with the aid of various strategies pertaining how they could sustain their entrepreneurial activities.

The presence of competitive strategies is an indication that there are elemental moves that are trying to provide opportunity for those companies that are employing strategic management activities.

Known to be one of the right courses of actions that would make the firm able to implement activities leading to the emancipation of corporate strategies and achievement of competitive advantage, strategic management has become the ultimate way to carry out new business opportunities. There are diversified activities in line with strategic management and one of them is strategic entrepreneurship.

Entrepreneurs use strategies in order to obtain the linked up goals relevant to the firm’s growth and expected accomplishments. For this reason, they have the chance to explore in the field of strategic entrepreneurship.

The area of strategic entrepreneurship just like in any field requires exploration and meaningful understanding. There are many things to learn from it and the point whether it would bring competitive advantage to an existing firm that is adapting it requires substantial investigation for that matter.

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IvyPanda. (2019, June 3). Economic Policies in The Global Economy. https://ivypanda.com/essays/economic-policies/

"Economic Policies in The Global Economy." IvyPanda , 3 June 2019, ivypanda.com/essays/economic-policies/.

IvyPanda . (2019) 'Economic Policies in The Global Economy'. 3 June.

IvyPanda . 2019. "Economic Policies in The Global Economy." June 3, 2019. https://ivypanda.com/essays/economic-policies/.

1. IvyPanda . "Economic Policies in The Global Economy." June 3, 2019. https://ivypanda.com/essays/economic-policies/.

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IvyPanda . "Economic Policies in The Global Economy." June 3, 2019. https://ivypanda.com/essays/economic-policies/.

Generative AI: the likely effects on productivity, growth, wages and inequality

The invited policy 79th Economic Policy panel meeting (4 April 2024) featured Daron Acemoglu of MIT presenting a new analysis on the large macroeconomic implications of advances in generative artificial intelligence.

Artificial Intelligence and the Economy

The 79th Economic Policy Panel meeting took place on 4 and 5 April 2024, hosted and supported by the National Bank of Belgium. The papers presented will be part of a Special Issue on ‘Artificial Intelligence and the Economy’.

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Generative ai: the likely effects on productivity, growth, wages and inequality.

The invited policy session of the 79th Economic Policy panel meeting (4 April 2024) featured Daron Acemoglu of MIT presenting new analysis of claims about the supposedly large macroeconomic implications of advances in generative artificial intelligence. Using a task-based approach to assessing AI’s effects on productivity, his study concludes that the impact on GDP is likely to be modest. The research then explores the wage and inequality effects of generative AI, concluding that even if generative AI increases productivity in various tasks, these are unlikely to translate into higher wages or lower inequality. Rather, more favorable wage and inequality effects will depend on the creation of new tasks for workers in general and, more specifically, for middle and low-pay workers. Finally, it is important to consider the negative social value of some new AI tasks, such as manipulative advertising, and their potential macroeconomic effects. Following the presentation, there was a panel discussion featuring Benoît Cœuré , President of l’Autorité de la Concurrence – French competition authority, and David Hémous , Associate Professor at the University of Zurich and Affiliated Professor at UBS Center for Economics in Society. Moderated by Tim Phillips of CEPR.

Simple Macroeconomics of AI

New research on the macroeconomic implications of advances in generative artificial intelligence (AI) concludes that the impact on GDP is likely to be modest. What’s more, according to the study by Daron Acemoglu of MIT prepared for the journal Economic Policy, there is no evidence that AI will reduce labour income inequality. Indeed, some groups, […]

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Sabotage as Industrial Policy

We characterize sabotage, exemplified by recent U.S. policies concerning China's semiconductor industry, as trade policy. For some (but not all) goods, completely destroying foreigners’ productivity increases domestic real income by shifting the location of production and improving the terms of trade. The gross benefit of sabotage can be summarized by a few sufficient statistics: trade and demand elasticities and import and production shares. The cost of sabotage is determined by countries' relative unit labor costs for the sabotaged goods. We find important non-monotinicities: for semi-conductors, partially sabotaging foreign production would lower US real income, while comprehensive sabotage would raise it.

We are grateful to Corina Boar, Raquel Fernandez, Sam Kortum, and Jesse Schreger for valuable comments. Please contact [email protected] with any questions or comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

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Productive capacities, economic vulnerability and growth volatility in sub-saharan africa.

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Sub-Saharan Africa (SSA) countries, like most developing countries, face major challenges to achieve strong, sustainable, and inclusive growth with the view to reduce significantly persistent poverty and inequality. Many of these challenges results from a high level of economic vulnerability due to simultaneous shocks, notably the Covid-19 pandemic, climate change and the multiplicity of armed conflicts. Hence the need to study policies and means of strengthening economic resilience to shocks. This paper analyzes the effects of productive capacities on the volatility of economic growth in SSA countries when faced with significant vulnerability. The study covers the period 2000-2018 for 43 SSA countries. Using Generalized Method of Moments (GMM), the results show that economic vulnerability contributes to growth volatility in SSA. However, this effect varies according to the performance of productive capacities. Countries with high productive capacities have greater opportunities to mitigate the effect of economic vulnerability on growth volatility. Some specific dimensions of productive capacities (Institutions, ICT) seem to matter more than others. The results of this study provide important recommendations to policy makers.

Working Paper No. 2024/169

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WPIEA2024169

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A New Era of Financial Warfare Has Begun

The west’s latest actions against russia carry risks for the global system and could provoke china..

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Russia’s War in Ukraine

Understanding the conflict two years on.

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Washington and the West have begun a new phase of financial warfare against Russia and China—a powerful but also potentially risky escalation that, if people aren’t careful, could eventually give Moscow and Beijing exactly the outcome they are believed to be looking for.

How so? Because the unprecedented actions taken at the G-7 summit in June to hand over to Ukraine billions of dollars in profits earned on frozen Russian assets—along with new actions taken against Chinese banks—could begin to undermine the legitimacy of the U.S.-dominated international financial system, some experts say. And that could make Russian President Vladimir Putin and especially Chinese President Xi Jinping, who is said to want to create an alternative renminbi-based financial system, very happy in the end.

At a time when many nations are unsure about whether to do business with Russia and are falling into the debt-enforced embrace of China, the G-7 action sends a message: What was once sacrosanct in international finance may be no longer. A number of sovereign wealth funds, central banks, corporations, and private investors—especially from the smaller countries of the global south that are most vulnerable to sanctions—may well want to hedge against full investment in dollar- and euro-based holdings.

“This decision crosses the Rubicon,” said Ryan Martínez Mitchell, a law professor at the Chinese University of Hong Kong, by “weakening the norm of sovereign immunity for foreign central banks.”

“Any shift away from a U.S. dollar-based global financial system is not a near-term prospect, but decisions like these do probably add to the constituency that would welcome that kind of future,” Mitchell said. Others agree. “There were many forces pushing for a search for alternatives to [the U.S.] dollar, and this move will give an additional push to those efforts,” said Harold James, a financial historian at Princeton University. “I believe we are at a tipping point in which two worries coincide: one about the likely fiscal path of the U.S. and an unsustainably large burden; the second about seizure of assets, with secondary sanctions possibly being applied to countries that are in a supply chain with China and then indirectly with Russia.”

The “tipping point,” James warns, could come in the form of many countries, even U.S. allies, beginning to move their assets away from the dollar and euro. According to Raghuram Rajan of the University of Chicago, a former governor of the Reserve Bank of India, nations are disturbed by the idea that Russia’s $300 billion in central bank reserves have been inaccessible for more than two years. “Some central banks have started diversifying reserves a little more as a result, including into gold,” Rajan said.

James added: “One sign that I find very telling is how Central European countries, the Czech Republic and Poland, both of which feel very close to the U.S. and who weren’t interested in gold reserves when they felt secure—indeed, the Czech Republic sold its gold reserves the day they entered NATO in March 1999—are now buying large amounts of gold.”

Putin himself spoke triumphantly of this trend in his notorious interview with renegade U.S. newscaster Tucker Carlson in February. Washington’s decision “to use the dollar as a tool of the foreign-policy struggle is one of the biggest strategic mistakes made by the U.S. political leadership,” Putin said , pointing to America’s fiscal profligacy. “Even the U.S. allies are now downsizing their dollar reserves.” At another point, Putin warned other countries that they “could be next in line for expropriation by the United States and the West.”

Wary of the risks of sending a destabilizing message, the G-7 did stop short of actually seizing the Russian assets at its summit in Italy. Instead, it adopted a complex scheme to transfer so-called windfall profits on earnings from frozen Russian central bank securities—the earnings of some $3 billion to $4 billion a year come from investments by Euroclear, the financial services company in Belgium that holds the Russian assets—to supply finance to Ukraine.

It was unprecedented all the same. As a senior Biden administration official described it: “Never before in history has a multilateral coalition immobilized the sovereign assets of an aggressor country and then found a way to unlock the value of those assets for the benefit of the aggrieved party as it fights for its freedom. That’s what happened at this G-7.”

However it’s done, making money off other nations’ assets—even aggressor nations, such as Russia, in total violation of global norms—is a risky precedent. “Once a new sanction becomes seen as effective, its usage tends to proliferate,” said Jon Bateman, a senior fellow at the Carnegie Endowment for International Peace. “In recent years, creative new uses of export control powers—such as the Entity List and the Foreign Direct Product Rule—have ping-ponged between Chinese and Russian targets, with each country serving as a proving ground for actions later taken against the other.”

Nor did the G-7 leaders stop there. They also indicated that new measures were being considered that might gradually cut Beijing out of the international financial system. While saying in a communiqué that they “recognize the importance of China in global trade” and affirming that they “are not trying to harm China or thwart its economic development,” the leaders obliquely threatened Chinese banks “and other entities in China” with measures to “restrict access to our financial systems.” That could ratchet up the war—and the risks to the system—dramatically.

China has already been quietly insulating itself from financial retaliation over its support of Russia in the past two years, said Hung Tran, a former deputy director at the International Monetary Fund, in a June 21 interview. “The major Chinese banks have been very cautious even in reducing their exposure and dealings with Russia. In place of that, smaller institutions not having any business with any U.S. entity have been set up to handle trade with Russia so that basically Russia-China trade is settled in renminbi and rubles.”

The senior administration official justified the decision to increase pressure on China by saying that “some of China’s actions to support the Russian war machine are now not just threatening Ukraine’s existence but European security and trans-Atlantic security.” The official added that among other “unrivaled policy distortions coming out of China”—meaning its unfair trade practices—Beijing was now openly supplying dual-use components and other economic aid to Russia. “There was unanimous agreement that the Russian military has been sustained by transforming its entire economy into a war machine and because China and other countries have been willing to serve” that effort, the official said.

In a blunt statement during his visit to Beijing in April, Secretary of State Antony Blinken reiterated these accusations, declaring that China was “powering Russia’s brutal war of aggression against Ukraine” as “the top supplier of machine tools, microelectronics, nitrocellulose, which is critical to making munitions and rocket propellants, and other dual-use items that Moscow is using to ramp up its defense industrial base.”

The actions taken at the G-7 summit may well have been necessary. Nearly two and a half years into the war, support for aid from the United States and Europe is flagging, Kyiv’s forces are exhausted, Russia’s economy is still looking fairly robust, and a new anti-Western alignment is hardening between Moscow, Beijing, Tehran, and most recently North Korea. “We are stepping up our collective efforts to disarm and defund Russia’s military industrial complex,” the G-7 leaders said in their communiqué.

This latest approach to squeezing Russia started slowly, even painfully, amid a great deal of tension between the United States and European governments about just how tough to get with Moscow. Immediately following Putin’s invasion of Ukraine in February 2022, none of those governments had a problem imposing the usual economic sanctions—import and export restrictions and the like—and quickly. They took a major step further when they froze Russia’s central bank assets—an unprecedented move against such a large country—in addition to real estate properties, stocks, bonds, and various investments held by Russian oligarchs.

But actually seizing those bank assets was seen as a step too far, especially by the Europeans, who fought off an effort led by the U.S. Congress, and ultimately backed by the Biden administration, to pursue full seizure. That meant tampering with the international financial system itself—the complex postwar network of norms, codes, and laws that has underwritten the greatest surge of prosperity in recorded history and enriched the West. That felt a little too much like playing with elemental fire because it meant threatening the idea of sovereign immunity that is central to the system and because it meant posing increased risks to the holding of dollar- and euro-denominated assets. And having established this precedent, what about China? What effect will the G-7’s warnings have on Xi?

The shot fired in the communiqué could deter Xi from doing even more to isolate China’s ailing economy than he already has—specifically by invading or blockading Taiwan. Or, alternatively, it could mean the beginning of the end of the postwar global economic system if Xi decides to move against Taiwan anyway. Indeed, he could easily gamble that the United States wouldn’t dare do to China what it’s doing to Russia for exactly that reason.

If the United States and West were to respond to an invasion or blockade of Taiwan by freezing and leveraging Chinese assets, the result could be a freeze-up of the whole financial system and a devastating blow to the global economy. In the case of Russia, Washington needed to undergo many months of negotiation with the European Union because the vast majority of Russian assets are held in Europe and there was only about $300 billion or so to freeze. The same is not true of Chinese assets, which are huge and spread all over the world. Under the International Emergency Economic Powers Act, Washington would be able to freeze some $800 billion in Chinese Treasury bill holdings entirely on its own, which is only a portion of some $3 trillion in Chinese-owned sovereign assets overseas. But Beijing could easily retaliate against that nearly $6 trillion in Western investment in China.

As Tran argues, the threat of a kind of financial MAD, or mutual assured destruction, is far too great. In “terms of balance sheet exposures, China has about $3.4 trillion of identifiable international assets at risk of possible sanctions and up to $5.8 trillion of liabilities to, or assets in China of, international investors and companies largely from Western countries. China therefore has plenty of room to take retaliatory actions,” Tran wrote in a 2022 post for the Atlantic Council titled “Wargaming a Western Freeze of China’s Foreign Reserves.”

The deep cross-integration between China and the West is what has led both sides to avoid a complete decoupling of economies, reflecting what former U.S. Treasury Secretary Larry Summers once called a “financial balance of terror.” As a result, “there will be more resistance to imposing the scope of sanctions we have imposed on Russia because Western economies are far more intertwined with China’s than they were with Russia’s,” said William Reinsch, a former U.S. commerce undersecretary now at the Center for Strategic and International Studies.

Reinsch notes there is an important “qualitative difference” as well: “The Russian assets being used are those seized from oligarchs who have supported/enabled Putin. There are some Chinese oligarchs, but their relationship with their own government is much different, as is their role in the economy. If you go beyond oligarchs, you get very quickly to seizing sovereign assets, which I doubt the West would do and for which the consequences would be significant.”

But according to some China experts, the latest moves might only spur Xi to further decouple his economy. The “dimmer” that peaceful reunification with Taiwan seems, “the more incentives Beijing would have to reduce vulnerabilities to sanctions in case of a militarized conflict,” said Zongyuan Zoe Liu, a fellow at the Council on Foreign Relations and columnist for Foreign Policy . “China has been diversifying its foreign exchange reserves since the 2000s. While previously the primary motivation was to search for higher returns and strategic assets, now it is also to reduce vulnerabilities to sanctions.”

And while Xi’s dream of a renminbi-based system still “has a long way to go”—the yuan is a distant fifth in global reserve currency holdings—escalating Western moves “may ultimately weaken international law protections for everyone, not only their intended targets,” Mitchell wrote recently for the Quincy Institute. As a result, “intensified weaponization of Western currencies could indeed boost China’s yuan efforts, and, more significantly, provide a major stimulus to plans for a BRICS basket reserve currency. The move would simultaneously improve Beijing’s reputation as an apparently more responsible actor with respect to foreign assets, while also perversely incentivizing it to further experiment with its own nascent unilateral sanctions regime.”

Russia is much more willing than China to blow up the international system. But that doesn’t mean Xi won’t decide he can afford to see that happen as well. As Tran argues, Beijing has been pursuing a “dual-track” strategy of working within the current Western-led trading system “but also wanting to find alternative ways to do this trade without being exposed to dollar sanctions.” Further sanctions could only push Xi further in the radical direction of trying to set up an alternative renminbi-based financial trading system.

“Both sides are kind of upping their ante,” Tran said.

Michael Hirsh is a columnist for Foreign Policy. He is the author of two books:  Capital Offense: How Washington’s Wise Men Turned America’s Future Over to Wall Street  and  At War With Ourselves: Why America Is Squandering Its Chance to Build a Better World . Twitter:  @michaelphirsh

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Gov. Tim Walz of Minnesota, the newly announced running mate to Vice President Kamala Harris, has worked with his state’s Democratic-controlled Legislature to enact an ambitious agenda of liberal policies: free college tuition for low-income students, free meals for schoolchildren, legal recreational marijuana and protections for transgender people.

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