Jedi monetary policy is an article that was written by Jonathan Wright in Washington. The article was written on 8th September 2011. The article is criticizes the actions that the Swiss national bank has taken to stimulate the economic growth of the country.
According to the article, the Swiss government aimed at stimulating the economic growth by the applicatication of macroeconomic policies. The Swiss government aimed at increasing the economic growth rate to at least 6 percent. The writer of the article points out several policies that the Swiss national bank could use to stimulate the economy. He shows that the interference that the national bank used was too much and instead, the bank should have allowed the market forces to solve the problem without much interference. One of the methods that the writer proposes for use to stimulate economic growth in Swiss is influence on the long run interest rates in the country. The writer also proposes the change in the exchange rates of the country in order to stimulate the desired economic growth. He however points out that the use of this policy would make other countries to retaliate by coming up with their own protectionism policies.
The article is related to the use of macroeconomic policies to influence the export of goods to other countries. The Swiss government aims at increasing the economic growth of the country by increasing the exports of the country. The Swiss national bank aimed at lowering the value of its currency in order to make its exports more attractive. The national bank did this by selling its currency in exchange for a dollar. The value of the currency decreased to a considerable level hence matching the objectives of the bank. However, the article is against these actions. The sale of the currency would mean that more money has to be printed in the country. As a result, this would lead to inflation in the country since the prices of goods and wages will rise. If inflation is not controlled, the nominal growth of the economy will be observed but the real growth in the economy will not be present.
The writer of the article proposes the lowering of the value of the Swiss currency as a means of stimulating exports and hence economic growth. However, the danger in this is that the other countries in the world will observe the actions of the Swiss national bank. As a result, these trading partners will come up with their own protectionism policies so as to protect their balance of payment in return. This means that this policy may not meet the objectives of the Swiss government.
The other policy that can be applied is the changing of the long term interest rates. The increase in the interest rates will facilitate capital inflow in the country due to increase in investments in the country. The increase in the interest rates will make the country attractive to invest in by the foreigners. The Swiss government could do this by buying the bonds in the domestic market. For the government to buy the bonds in the market, it has to offer a higher return. In addition, the purchase of the bonds increases the demand for bonds in the country hence increasing the interest rates in the country. This is the objective of the Swiss government as it will increase foreign investment thereby increasing output hence economic growth in the country.
The article is very informative as it has helped me to visualise the application of the various macroeconomic policies to solve economic problems. I would recommend altering of the interest rates as a means of stimulating economic growth. This policy has less negative impacts on the economy. In addition, this policy is likely to lead to creation of employment in the country. This means that the policy will solve more economic problems.
