A high inflation will depreciate the domestic currency and an increase in inflation will increase the demand for foreign goods. It also decrease export, leading to balance of payment deficit. Hence, exchange rate on the foreign base countries currency will rise which appreciate the home base currency, (Madura, 2008). He also explained the relationship using the purchasing power parity. The theory of PPP states that a basket of a good in one country should have the same cost in another country, taking into account exchange
The accounts of British and U.S. economic predominance are cases in point. The two former hegemons have had substantial roles in promoting global economic growth during their years of prominence, with the latter continuing its dominance. The rise of the United States as an economic hegemony followed the decline of the British domination and the Great Depression after the Second World War. The U.S. mainly drew on its increased production capacity and advancement in research to achieve economic dominance. The U.S. was committed to restoring competiveness, stability, and openness primarily by reviving the European and Japanese economies through currency devaluation to enhance exportation from these economies.
A research was done Terrance Odean in 1998 under the name “Are Investors reluctant to Realize Their losses?”. Odean tested the disposition effect as said by Shefren and Statsman, that is the tendency to hold losing stock too long and sell winning stock too early. Odean also considered tax consequences. Odean analyzed trading transaction records at a brokerage house. These records revealed that gains are realized quickly by investors than the losses.
.3.3 Inflation Rate The inflation rate used as an indicator in measuring the stability of economic condition for a particular country (Rashid et al., 2011). In financial theory, inflation rate reflected by consumer price index (CPI) represents all the price of goods and services will go up and it need to take more money to buy the same items. Moreover, high inflation is likely cause a great impact on economic activities of a particular country because it reduces the purchasing power of domestic consumers and it would lead to currency value decline. The previous researchers believe that the inflation rate will influence the stock market return. There are many empirical studies establish that the inflation rate has an impact on stock market
First, the fiscal stimulus of Abenomics have brought out the groundwork for future growth and create temporary jobs. This improvement helps to increase in public investment and reduce the unemployment. According to data from the Minsitry of Health, Labor and Welfare and the Statistics Bureau, Ministry of Internal Affairs and Communications, the presentage of Japan job openings to applicants from 0.83 in December 2012 increased to 0.90 in May 2013 and the unemployment ratio from 4.3 in December 2012 decreased to 4.1 in May 2014. Not only the job opportunity, the fiscal policy of Abenomics has also risen the short-term business sentiment diffusion index. According to the data from the Bank of Japan, the large-scale Nonmanufacturing Businesses from 4 in December 2012 increased to 12 in June 2013.
Short-term executive compensation plans have the following features: (1) the period used for assessing corporate performance in one year; (2) accounting measures such as net income, increase in net income, return on assets, or return on stakeholder’s equity. Other features including a minimum desired earnings level that must be achieved before bonuses are paid out. Upon empirical research, in 1990 Watts – The bonus plan hypothesis assumes that executives with bonus plan are more likely to use accounting methods that increase current period reported income since accounting profits such as net income is a measure of performance. Short-term bonus plans are adopted by corporations to address incentive problems. These include risk-aversion problem, horizon problem, and the over-retention problem (Smith and Watts,
Target Holdings was a case decided during the 1980s and 1990s recession. During that time period, the law saw a surge in lender-solicitor claims in relation to commercial transactions of property. Initially, these claims were pleaded under contract or tort law. However, the results of these claims were more favourable to solicitors than to lenders. Thus, the lenders retaliated back by dressing up their claims as breach of trust or fiduciary duty and putting forth that mortgage monies were held on trust for the lender until the purchase of the property was complete.
In the late 20th century, the literature on welfare effects of inflation has been polarised by contributions from Lucas (1993, 2000), Gillman (1993, 1995) and Dotsey and Ireland (1996). According to Chen et al. (2014), inflation is the sustained increase in price level that results in the decrease in welfare of Chinese citizens. The findings from this study is intriguing as it proves that if inflation increases by 0.1% in China, the welfare of Chinese citizens will decrease by 73.0 to 164.1 RMB. Importantly, this study also argued that the welfare costs of inflation vary depending on the different income groups.
Hence, with this policy, it can sustain the economic growth by influencing aggregate demand or spending in the economy such as opening market operations, changing the bank rate, changing the cash reserve ratio and undertaking selective credit controls. (Guru, 2015) With the implementation of monetary policy, Southeast Asian central banks have succeeded in controlling inflation from their high levels in 1970s to low levels in 1980s, except in the Philippines. As depicted in table 3 below, the country has experienced inflationary hits when its currency value against US dollar has decreased from 7.10 pesos during the year 1971 to 1980 to 17.10 pesos during the 1981 to 1990 period. Evidently, the government policies that were implemented have been effective in keeping the inflation under control and they help to boost the economic growth by stabilizing the prices in Southeast Asia. Apart from Singapore, Southeast Asian economies have adopted monetary policies.
Another argument refutes the claim that lower taxes for the rich encourage them to invest more which brings about economic growth. In the late 1920s and once again in the earlier part of the last decade, a lot of money was put into speculative investments than productive investments. Hence, increased government spending on improving the labour force and infrastructure through revenue generated from taxes can possibly be more effective than investments in driving economic growth. Now let us look at the other side of the coin – the negative impact of taxation. Taking into consideration other factors such as government spending, business cycle conditions and monetary policy, research has consistently pointed towards the fact that taxes have a significant negative effect on economic