Effects of Changes of Interest Rates & Inflation

1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?).

South Africa is a primary-sector economy, which produces gold and agricultural goods and is therefore primarily product dependent. Primary product dependency is a constraint on economic development. The dependency makes South Africa very vulnerable in the event of natural disasters. Furthermore, downward price fluctuations caused by exchange rate movements or variable harvests can have a devastating impact due to the low price elasticity of demand for primary products.

Inflation is the sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. (Investopedia) During periods of inflation, the prices of products and services will rise. There are several reasons why an economy would see a rise in inflation. Decrease in supplies, corporate deciding to charge more, and consumer confidence are some of the reasons why an economy would see the inflation rate increase. Consumer confidence is when consumers gain more confidence in spending due to a low unemployment rate and wages being stable. Decrease in supplies is when consumers are willing to pay more for a product or service is that is slowly becoming unavailable due to a decrease in supplies. Corporate decisions are when the corporations basically decide

In economics, with the inflation is a rise in the actual general level of prices of goods and services in an economy from over a period of time. When the general price level rise, such as each of the units currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power4 per unit of money. This therefore means that with the loss of real value in the medium of exchange and unit of account within the given and actual economy. With a chief measure for example and the price of inflation is within the given inflation rate, the annualised percentage change within a general price index over time in which is normally the consumer price index.

In every country of the world, exchange rate level is the paramount target of economic policy targeting. In other words, exchange rate policy should be geared towards the attainment of long-term equilibrium rate, so as to achieve certain macro-economic objectives e.g. balance of payments equilibrium, through proper management of the Nigerian exchange rate policy. The country started operating the floating exchange rate system in 1986 after the introduction of SAP. It was expected that the country experience development but the reverse was the case because the country suffered consistent hopeless development situation as her naira depreciates often against other foreign currencies, especially the dollars which was universally accepted as the global medium of exchange. Before the floating system was introduced, $1=NO.89 but after that in 1966 we have $1=N22.05 and even today we have $1=N150.7 .This is quite disheartening, regardless of the effort of the government of Nigeria through the activities of the regulatory body such as the establishment of second tier foreign exchange market (SFEM) in 1986 and interbank foreign exchange market (IFEM) in 1989 and currently the foreign exchange market (AFEM) in 1995.

PESTLE ANALYSIS1.Wiggleworth,R.Egypt bleat outlook on debt,09/02/11,ft.com2.Stubbs,J,Investor strategy,13/04/07,ft.com3.Ho,S at all,incomplete transfer phenomena,international marketing reviw vol.5.4.Bevis,G,VAT RISE TO 20%,22/06/10.thisismoney.co.uk5.14/09/10,UK inflation rate,bbc.co.uk6.Gardiner,K,at all, Emerging market fear,09/02/11,ft.com.7.Wolf,M,a STRATEGY FOR GROWTH,10/023/11.FT.COM8.Cohen,N,Price inflation hit,15/02/11,ft.com.9.

Inflation is an increase of the currency of a country by issuing more printed money.

The international and regional business cycles refer to fluctuations in the level of economic activity in the respective global and regional economy over time. SA’s high protection and corruption in the 1980s meant that the business cycle did not strongly affect it at this time. However, since SA’s trade intensity has increased (exports now account for 27% of its GDP) and its export base diversified, it has had a growing dependence on other countries. Globally, SA’s reliance on foreign funding for domestic investment meant that the GFC devastated the economy, with a -1.8% growth in GDP experienced in 2009 as opposed to 3.7% in 2008 highlighting the impact of the international business cycle on SA. Regionally, SA has taken a leading role in Africa, being a leader in the “New Partnership for Africa’s Development” program to enhance growth and development in the region, and exporting about 1/3 of its exports to

Inflation is defined as a sustained increase in the general level of prices for goods and services. what does it mean to me well inflation is when the economy thinks that it is doing good but they make to much on one thing that people don't want to buy no more so they increase the price and that inflation happens.

on the South African economy and may seriously affect the African continent to some extent.

The relationship between inflation and unemployment is a topic, which has been debated by economists for decades. It is this debate that has made the opinions about it evolve. In this essay, the controversial topic will be discussed by viewing different economists’ opinions on that according to time sequencing.

The details below analyze the unemployment rate in Namibia and it reveals that jobless growth appears to be norm in the country with unemployment rate increasing even in the time of high economic growth as measured by GDP (gross domestic product). This shows that unemployment in Namibia does not react to cyclical changes in the level of economic activities. There are some key factors that contribute to high unemployment rate in Namibia.

To enhance the data, I gathered for my research and bring it all together, I conducted three semi-structured interviews to help me uncover a better understanding of what the impact on a fluctuation in interest rates from the Federal Reserve has on the economy and market in the U.S and other countries. During this time, I had three participants who donated their time to tell me a little more about themselves and what they knew about my topic. Participant 1, was a sixty-one-year-old male whom is a finance professional, as is he also a finance professor at Pace University. The knowledge he provided to me was very educational and helped me understand a little more about the missing information I needed to obtain from my literature

South Africa’s loan increased from 40% to 70% of foreign debt. Its total foreign indebtedness increased steadily as loans were acquired from the IMF, whenever the foreign bankers turn down its request for loan. In addition, indebtedness was stabilized through gold swap. The debt problem became endemic in 1984, as about two-thirds of its outstanding loans had a maturity of one year or less. The public sector was responsible for the 16% of South Africa’s foreign debt; 44% of South Africa’s foreign liabilities were incurred by the banking sector; the remaining 40% were private liabilities. When Chase Manhattan withdrew substantial credit lines from South Africa in 1985, a major foreign debt crisis became glaring. The impact of credit freeze and refusal to roll credit over on South Africa led to a drop in the value of rand (South African currency) and temporary closure of the financial and foreign-exchange market. Liabilities not affected by the freeze include trade credits, credits guaranteed by the Paris Club, member governments, and loans from IMF and Central Banks. Also compounding South Africa’s debt problem was the large proportion of debt that was denominated in hard non-dollar currencies, but appreciated in dollar terms as the dollar weakened. Since then, South Africa’s external debt has been high and continued to follow a predictable upward trend, exerting substantial negative impact on productivity and growth. The Deutsche Bank (2008) showed the South African

Production in Nigeria has also increased in cost. This leads to the downfall of industries. The devaluation of currency is a major plank of World Bank and IMF policies for the development of the economies of Third World countries. Nigeria's compliance with this demand was allegedly tied to further rescheduling of Nigeria's external debt and fresh aids. Purchasing power of citizens would reduce with increases in price level and this would worsen the pervasiveness of poverty. Speculative activities in the economy will increase as a result of instability.