HELPING GROWTH IN OTHER COUNTRIES MACROECONOMICS ECON224-1104B-22 PROF. HECTOR MORALES VICTORIA ROCK DECEMBER 11, 2011
INTRODUCTIONThere are several things to look at when trying to encourage the growth of newly industrializedcountries. Here we will discuss two ways that many countries have used and are still usingtoday.
WAYS OF ENGOURAGING GROWTH There are two methods which encourage firms to grow, and are used worldwide, includingHong Kong and Singapore. Expansionary Monetary Policy (deals with the banks) Expansionary Fiscal Policy (deals with the Government) With the Expansionary Monetary Policy, Central Banks may reduce interest rate by reducingthe overnight loan rate. When interest rates go down than firms can barrow at a lower rate,giving firms the chance to invest in machines, land, ects., and also allowing firms to pay lessinterest on debt, giving the firm the chance to grow. (Chapter 31: Monetary Policy, 2009) With Expansionary Fiscal Policy there are two methods through increase governmentspending and tax cuts that can help. By increase government spending, government mayincrease spending and target these funds towards certain firms. Such increases may be in theform of giving out a loan, such as a bailout, like what we saw here in the United States, or givingout a big contract to the firm. An example would be if the Governments of Hong Kong andSingapore wanted to encourage growth in the financial sector, they may give some governmentfunds for these firms to invest. If firms have more business, they will hire more workers, thuspromoting growth. (Chapter 29: Fiscal Policy, 2009) For similar reasons as increase governmentspending, the government may reduce corporate tax rates. By doing this, firms will have moreprofit, allowing for the hiring of more workers and more investments, equaling to growth of thefirm. (Chapter 29: Fiscal Policy, 2009)
CONCLUSION Because these methods are used around the world and have worked for many firms, andgovernments, Hong Kong and Singapore firms would benefit from these polices.
REFERENCE(2009). Chapter 29: Fiscal Policy. In P. &. Krugman, Economics (pp. 767-796). New York: Worth.(2009). Chapter 31: Monetary Policy. In P. &. Krugman, Economics (pp. 831-858). New York: Worth.(2009). Chapter 33: Macroeconomics: Events and Ideas. In P. &. Krugman, Economics (pp. 885-907). New York: Worth.