1. Introduction Income inequality has grown significantly during this past decades and this phenomenon continues to increase over the years. This problem is constantly discussed in the daily news all around the world. Several consequences of this increase of inequality between people leads to economic problems such as high unemployment rates, lack of work for young people, fall of demand for certain product. The gap between rich and poor is increasing, the rich are richer and the poor are poorer as a result politicians and economists try to adopt certain policies in order to reduce this gap.
This shows us on average Education is getting expensive. In South Africa they are trying to increase the purchasing power of Rands against other currency, that’s the reason cost of living is getting too high. The government increases taxes and prices of food are going up. There is high pregnancy in the country which lead to rapid economic growth. Prices of petrol is going up and down, now we have to import most of our resource for foreign country which those not help because we support other country’s economy to grow instead of ours.
Developing economies, particularly the low and middle income countries, are renowned for their heavy reliance on external borrowing in their economic development process. Furthermore, the forces of globalization and interdependence among countries in international trade, capital flows and international lending are now much stronger, that has accelerated the adverse effects of global shock dissemination among the developing economies. Historically, pre and post the 1997-98 East Asian financial crisis, the accumulation of the debt stock is dramatically increasing from year to year and most generally these developing economies had a large current account deficits that were financed by foreign capital inflows. For most of the countries under discussion, the developing economies data demonstrates their total external debt relative to their national income and the external debt as a percent of GDP are higher than normal. Similarly, these countries also shows their higher debt servicing ratios and the significant currency devaluation experienced in economy.
.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
For the economy as a whole, demand pulled inflation refers to the price increases which results from an excess of demand over supply. It is a form of inflation and categorized by the four parts (households, businesses, governments and foreign buyers). When these parts want to purchase greater output than the economy can produce and we need more cash to buy the same amount of goods as before and the value of money falls, so they have to compete in order to purchase limited amounts of products and services. Generally, the demand-pulled inflation result from any factor that increases aggregate demand. Also, an increase in export and two factors controlled by the government are increases in the quantity of money and increases in government purchases
Thus increasing the prices and constancy the income dramatically, cause inflation which means increasing in the prices, decreasing in the purchasing power of money with increasing in the available currency, but not enough goods and services (The American Heritage, Published by Houghton Mifflin), thus inflation means increasing prices but with enough money but less goods and services; as a result, inflation can affect the objectives of the macroeconomic. One mainly of the objective is balance of trade and provide markets with enough supplies with suitable prices. Moreover inflation has many causes, a lot of consequences on the economy and society, but also inflation has some solution to figure it out in order to prevent its effects. Inflation has many reason to take place in Egypt. According to the National business “printing more money only adds to Egypt inflation”.
From Carlson and Osler (1998), individuals in the market speculation on exchange rate comes as a results of the type of shock. Speculations can lessen exchange rate impact on the shocks that is a downward pressure on the currency. Contrary, changes interest rate or risk do affect speculators directly on portfolio positions. They specified that for a huge number of speculators in the market, the adherence to the shocks will increase so exchange rate responses to these changes are high. 3.
when the economic activity is high, the stock prices are also high indicating the prosperous outlook for sales and profit of the firm. Many countries of world are plagued by a rising rate of inflation. Economic analysis helps in providing an explanation of why inflation has taken place. It also suggests ways in which rate of inflation could be brought down, so that economic development could
And also the main reason of fluctuation and hurdles in economic development because of interest rate of money. And also creates unequal of distribution of wealth within the society as power of money in few hands. (Farooq 2012). Interest rate affects all sectors of all economy It has a major impact on banking sector because many countries have directly deal with money. The globalization is increasing so it has made efficiency as the most important factor of both financial and non-financial institutions and banking sector as the life of blood the modern trade of commerce.
Economic growth in most of the African countries has been suffering from civil conflicts associated with political upheavals, weakening of the global economy, and decline in the world market commodity prices, volatile oil prices and the raising in food prices. The rising in oil prices have caused most of the persistent inflationary pressures in these economies as well as causing destructions in the purchasing power of national currencies and the economy as a whole. However, since mid-1990s the economic growth in Africa begun to increase steadily. This was stimulated by the improved political, microeconomic stability as well as the microeconomic reform efforts that were undertaken by various African economies during that decade. Despite this growth, to many of these countries this was the recovery from the devastating civil wars and long periods of economic decline since the oil crisis in the early1970’s.