Sample Critical Thinking On Competing Views In Macroeconomic Theory And Policy
Is there any relationship found among the theory of economics with its Practicality in BRICS countries
There are numerous points that are exclusively highlighted in this particular article. The article had written by Karl Theodoz Zu and Richard Werner on August 18th, 2014. The major points found from the article are as follows (Guttenberg and Werner, p.1)
It is better to come with up own Development bank within the premises of an economy rather than emphasizing over the International Monetary Fund (IMFs) and external debts
A Stimuli bank become extremely productive in terms of providing credit to the banking sector to boost up the morale and effectiveness of the bank through fiscal policy functions
Government should diverts the attention of the people from buying of their issued bonds towards the bank borrowing, which would certainly increase the level of money supply with an economy, and will also have a positive impact over the collection of tax revenue
Creation of Development Banks by BRICS countries will certainly boost up their morale, and will enable them to give external credit to different under developed and developing countries of the world merely to increase foreign reserves
Maid Body Analysis
The article selected for this analysis is powerful and has some very interesting and valuable information in it. However, all the points highlighted in the analysis are not right and applicable correctly in the real practical scenario. The growth in terms of banking recognition and establishment will strengthen the function of financial regulations and economic development within an economy and it will also try to reduce the level of unemployment rate with a positive attitude. Banks and Financial Institutions should not be used only for the Money Creation, as they should play a role as an intermediary between a buyer and seller. Yes! Money creation can be a major function of an economy; however, managing the current money supply within a country is also a major function of the financial institutions which cannot be complete without the issuance of bonds and treasury securities. Without the issuance of bonds and other type of debts, an economy cannot initiate Open Market Operations (OMO) through which the money supply of a country can be managed in an organized manner. The article found that the economic position of an economy can be analyzed with the help of amount of their financial institutions, and the working behavior of their financial institutions accordingly. Financial Institutions should be referred as the money creator by BRICS countries. Bank of England (COE) argued that banks manage 97% of the money supply within an economy, and their existence is extremely important for a sustainable and prosper economic future of a country
The emphasize over the initiative of Bank of England as far as strengthen the banks to work as Bank Credit for the Real economy was an affirmative action, but it is not as easy for the developing countries to pursue the same criteria, because their banking sector is not powerful as the banking sector of the United Kingdom (UK). If the initiative of BOE can be applied over the BRICS countries then it will surely increases the rate of employment within the country, but those employments will be based exclusively over the banking sector instead of spreading in other sectors of the economy as well. A sector which is managing the 97% of the entire money supply of a country should not be used solely for the purpose of money creation. Government should emphasize on decreasing the lending rate or discount rate of a country because it can become a major part to borrow high amount of funds from the financial institutions. In the current economic crisis, the thing that emerged effectively in an economy is their action towards the monetary policy Stance (MPS). Through, only developed and power countries can take such initiatives, and it will be extremely effective for their future and stability of their economy because it will increase the level of foreign reserves towards the country that will eventually decrease the Balance of payment (BOP) rate of the country with a positive mindset.
In conclusion, it can be said that economic prosperity and effectiveness is the basic right of an economy, and powerful actions should have been taken into account by the economies to strengthen their functions and operations to have enormous stability in their functions with especial emphasize over their financial institutions. It is also important for the financial institutions in BRICS to have strong influence of the macroeconomic functions on their core functionality to become economically powerful and active. It is also found that the statement of thesis has been confirmed from the same analysis.
Guttenberg, Karl-Theodor, and Richard Werner. 'How Money Is Made'. Project Syndicate 1.One (2014): 1-3. Print.