GLOBAL POLITICAL ECONOMY Essay Example | Topics and Well Written Essays - 2000 words

GLOBAL POLITICAL ECONOMY - Essay Example He decided to focus on the ‘supply of money instead of keeping the interest rates low’ (Rugman 2003, p.110). In this way, the lowering and the stabilization (at low levels) of the inflation were set as the new priorities of the US monetary policy. Through the above practice, interest rates in US were increased from 11% (as in 1979) to 20% (in 1980s), a fact that led to a series implications for the US economy, as explained below. The changes in the US monetary policy as developed in 1979 have been considered as a key point in the American economy, affecting the practices developed by US monetary policy makers up today. The effects of the US monetary and fiscal policies on the country’s economy are discussed in this paper. Emphasis is given on the fact whether these policies have strengthened America’s position in the global economy or not. It is concluded that such target was achieved but not without implications. The high level of the country’s debt is an issue that should be addressed in order for the growth of the country’s economy to be real – in all its aspects. 2. U.S. ... Through the decades, the effects of U.S. financial and monetary policies on the country’s economy have been differentiated, in accordance with the local political and social conditions but also with the economic environment in the global market. In any case, the stabilization of inflation at low levels, a key target of the monetary policy makers of 1979 has been achieved. However, periodically, the use of the above policy, i.e. targeting on low inflation, has been proved to be a rather inappropriate practice in order to face the market pressures, a fact which has been highlighted in the literature. In order to understand the effects of the US financial and monetary policies since 1979 on the American economy, it would be necessary to refer to the historical development of these policies, i.e. their range of appearance. Then, their effects on the American economy could be identified and evaluated – taking into consideration the conditions in the global market. One of the key characteristics of the update of the US monetary policy of 1979 has been the following one: emphasis has been given on lowering the inflation and keeping it on low levels. A strict monetary policy was used as a tool for achieving the above target (Allen 1999, p.170). The initial effect of the above policy has been the significant increase of the ‘LDC (less developed countries) borrowing rates’ (Allen 1999, p.170). Because of the above practice, the country’s economy has been negatively affected – the recession of 1981-1982 has been unavoidable. In this context, the initial results of the economic reform of 1979 in US – referring to the increase of the priorities of the country’s monetary policy, as described above – had been negative. A similar assumption is developed in