Falling Oil Prices Dissertation

Falling Oil Prices and their Long-term and Short-term Impact on Ordinary Investors

Falling Oil Prices – Oil prices for the better of human history have been subject to various factors like economic recessions and booms. All one has to do is to use history as a reference to ascertain whether these prices are likely to change when taking into account the prevailing global aspects like the change in the United Stated presidency. On the same note, it is undeniable that OPEC has acted to influence oil prices and hence the global economic setup. Bottom line, the crude oil industry experiences ups and downs and can only be treated as volatile.

It is for this reason that the effects of falling and low prices on investors ought to be interrogated in the sense that it is only prudent to assume that oil prices eventually influence investment decision makers. After all, oil prices have been found to have a tendency of affecting almost every aspect of the economy and hence both future and current investments. At the current global age, oil prices have experienced a dip and stand to remain so for a considerable time into the future according to economists and other stakeholders (Degiannakis, Filis & Kizys, 2014).

It is for this reason that OPEC, with its powers, has concentrated their efforts on ways and mechanisms to use in raising these oil prices including lowering production and hence prices. When there is a shift in oil prices, in this case, a downward shift, it means that they are losers and gainers. Thus, from a critical analysis point of view, there needs to be a careful and clear interrogation of the concept.

The purpose of this study paper is to investigate the impact of long term and short term implications of falling oil prices on the ordinary investor. The objectives of the study were to have a deeper understanding how this affects both energy dependent and independent investors. The study established that as oil prices continue to decline, it is crucial for ordinary investors to be long sighted in making their decisions. Though falling and low prices are a temporary phenomenon, it so happens that their effects can never be overlooked.

For example, low prices mean that oil and oil products consumers have a greater disposable income to spend on other products. This means that retail outlets experience a sense of business boom (Bohi & Montgomery, 2015). The same case applies for motor vehicle manufacturing industry whereby low oil prices induce prospective customers and consumers to indulge in buying more vehicles. Taking into account that the motor vehicle industry is rather a crucial sector of the global economy, it is only evident that oil prices have a causal effect on quite a large chunk of the economy.

The study further established that low oil prices have both macro and microeconomic effects which equate into more fiscal and monetary policies by stakeholders. For example, federal governments have to come up with such policies like increased tax rates due to the low revenue they get from low oil prices. Increased tax rates automatically affect ordinary investors. It is for this reason that such countries have to perform macroeconomic adjustments to cushion for these impacts. In so doing, falling or declining oil prices effects must be remedied by running substantial and rising fiscal deficits.

Additionally, falling oil prices results in reduced commercial activities around oil producing regions or areas in that such companies like truck retail and construction companies often reduce their investments due to low returns. This paper employed qualitative research methodology. Data was collected by reviewing relevant peer-reviewed economic literature on oil prices and the economy. Data was presented as a narrative essay and utilized convenience sampling method.

Statement of Problem

Though there have been numerous efforts geared towards understanding oil prices in the economy, the process has not been impressive so far. This is particularly so because ordinary investors may not be able to comprehend the underlying economic jargons, models and policies. More so, history have acted to teach investors lessons on investments in such cases where they are not sufficiently equipped to adapt to these oil changes. It has become increasingly important to have a better understanding and hence this study paper.

Thesis

This study paper investigates and establishes the long-term and short-term impacts of falling oil prices on ordinary investors. The paper seeks to help have a better understanding of oil prices impacts on the economy by reviewing both fiscal and monetary policies that are taken in accommodating these oil price changes.

Significance of the study

Findings of this paper may be used by relevant stakeholders to help curb negative effects of falling oil prices and encourage ordinary investors to enjoy the benefits that come with the same.

Review of Literature

Effects of Falling Oil Prices on Currency Devaluation and Investments

Currency exchange rate is the value which one currency is measured against another currency. With low and falling oil prices, there tends to be push-up domestic inflation due to high import prices. It is undeniable that investors require higher returns to compensate for the inflation. It the follows to compensate for inflation; the federal bank has to raise interest rates to curb inflation. With the government attempting to curb inflation, various steps are followed including Open Market Operations and Cash to Liquidity Ratio for banks (Nazlioglu, Soytas, & Gupta, 2015). The effect of raising the interest rate on loanable funds can be explained by the following economic model:

Falling Oil Prices - High Interest Rates
Falling Oil Prices – High Interest Rates

From the above analysis, it is evident that an increase in interest rate leads to a reduced supply of loanable funds and hence low investment from ordinary investors.

 The aggressive measures are aimed at reducing the supply of currency in the economy by making its supply low thus increasing its value. In so doing, the interest rate in the economy automatically increases meaning that the government is in a bid to discourage banks to lend loans and funds to the consumers and discourage investors from accessing such loans and finances. Consequently, it results to reduced investments. On the same note, it is important to note that currency value is a crucial factor in attracting foreign investments (Sadorsky, 2014). Thus a low currency caused by inflation acts towards discouraging ordinary investors from investing in such countries with low currency.

In the bond market, there is an inverse relationship between bond prices and interest rates such that if a currency crash was to happen, there is a likely hood of the bond market crash. High-interest rates caused by low or falling oil prices usually results into low bond values making it unattractive to ordinary investors including foreign investors who may be willing to invest in international government bonds.

The effects of declining oil prices in the economy have never been clearer. Falling oil prices mean that countries have to cut public budgets. This, in turn, has resulted into serious social and political ramifications that have been found to have a direct relation with investments. For example, in Russia, the ruble suffered significant devaluation with falling oil prices. Consequently, the stock-market prices tend to fall. The effects of declining oil are better understood when such factors like federal or central banks reserves shrinking, capital flight, low exports and low foreign investors are taken into account (Brown,Chan, Hu & Zhang, 2017).

Furthermore, when falling oil prices are significant enough, they tend to downgrade a country’s bond value to almost junk levels which are mainly done by credit rating agencies thus acting to discourage ordinary investors. Due to oil price weakness, Consumer Price Index has shown inflation might be incumbent in the long-run if oil prices are to continue into the foreseeable future. However, falling oil prices act like a tax cut for consumers such that they can spend other than oil and energy.

Currency devaluation in some cases may be a voluntary concept whereby a country may devalue its currency to make its exports competitive in the world market. In the recent past, China devalued its Yuen currency reaching an almost six year low (Basher & Sadorsky, 2016). Consequently, it resulted into the low crude oil. As the oil market is characterized by the dollar currency and hence dollar peg, countries have to act within and beyond their limits to maintain currency levels competitive against the dollar. As of the year 2016, the IMF urged Nigeria to devalue its currency as low prices hit the economy. Being an aggressive strategy, it was a viable option in attracting investments after the currency stabilized in the long-run.

In the Nigerian case study, the government sought to restrict access to foreign currency and ban quite a wide range of imports. Though this was viewed as being detrimental by the IMF, it was a measure to curb the effects of low oil prices and inflation (Alfaro, Bloom, & Lin,2016). The effects of the same were also felt by the common consumers and ordinary investors.

The Nigerian government was of the view that it was better to restrict access to foreign currency and limit certain imports into the country rather than devaluing their currency. This, of course, had a negative effect or impact on investors who dealt with this line of imports. Similarly, restricting access to foreign currency meant that local and international investors would not transact in certain currencies limiting their diversification both in stock and currency trading. Furthermore, in such a country which is import dependent in terms of food, it meant that investors had to get less for their money (investment returns) or had to charge consumers for their products.

In choosing not to devalue the naira, the Nigerian decision makers risked severe foreign exchange that could potentially lead to decreased foreign investment and hence an increase or surge in the black-market sector (D’Ecclesia, Magrini, Montalbano & Triulzi, 2014). Thus, this is a direct attack on the business sector especially considering that oil is just but one commodity affecting all other range of consumable products and services.

Falling Oil Prices and Increased Tax Rates

In a bid to recover tax revenues lost through falling oil prices, the federal or central banks usually takes upon increasing tax rates in the economy. Changes in the top marginal tax rates influence peoples’ decision especially in terms of consumption trends. From the argument of libertarians and economists at large, tax increase dissuades ordinary investors from economically viable projects. An increase in tax caused by falling oil prices automatically reduces the amount of disposable income for consumers meaning that they will spend less or forego certain products and services meaning such investors who had invested in those product lines experience a dip and form and revenue accruing from their operations. Additionally, when corporate taxes are high, it acts to derail additional investments. High tax rates mean that there is the low after-tax rate of return on investment hence low investment esteem.

High taxes in the economy results into low personal and house hold savings. Such savings would have otherwise been used for investment purposes in the long-run or even spent on goods or services at a future date (Brunetti, Büyükşahin, & Harris, 2016). When tax rates are increased, it means that there is a strong correlation between tax, interest rate, saving and hence investment. Taking into account that increased tax rates go hand in hand with high-interest rates, the effect of the same can be explained by the model below.

Falling Oil Prices - High Tax Rates
Falling Oil Prices – High Tax Rates

In increasing taxes, it has become a common phenomenon for federal and central banks to allow for tax credits. They have been found to be more favorable than tax deductions whereby the latter rarely occurs with falling oil prices. The value of a tax credit depends on the type of credit either given to individuals or individuals. In such cases where the government offers tax credits, it enables investors to continue investing in certain sectors of the economy to balance between high taxes effects and increased investment all the same. On the other hand, non-refundable tax credits are directly deductible from the tax liability (Enriquez, Smit & Ablett, 2015). Any excess of the same potentially reduces tax liability further. This has been found to negatively affect low-income earners because they are not able to enjoy and utilize the entire credit amount. Refundable tax credit is favorable and tends to promote expenditure and investment which is a good thing for ordinary investors all the same.

Falling Oil Prices, Local Investments and the Stock Market

With falling oil prices, it is a common phenomenon that business activities in oil producing regions tend to decrease. For example, construction companies benefit less from these low prices as oil mining and refinery companies have to cut and lower their production capacity in a bid to maintain high prices. The powers that OPEC has in dictating and influencing oil prices are quite shocking. According to the author, OPEC members’ oil production account for almost forty percent of the global oil supply which puts a considerable amount of power in their hands.

By acting as a united front, they would act to shape the future of the oil industry and more so regarding influencing oil prices to their advantage (Diaz, Molero, de Gracia, 2016). The underlying question is what would happen if these countries were to hold on and stop their oil exports for some time.

As of last year, oil producing countries including Russia and Saudi Arabia acted towards ensuring high oil prices. This was meant to reduce cut-throat competition and price under cutting proving that OPEC has the ability and power to increase prices. However, this was done by reducing the production levels and hence low supply into the market (Heitner, K. L., & Sherman, 2014). It is important to note that such countries like Venezuela have a binding agreement not to increase production significantly making the agreement even more strong in pushing the oil prices high.

With reduced supply and operations, local business suffers significantly. Ordinary investors in the housing sector feel the impact whereby the demand for housing units ultimately takes a deep. With reduced operations, there will be reduced workforce and hence a low demand for housing units. It is practical that with the opening of oil companies in a certain region, local businesses and investments sprout up. Thus, such investors like shareholders have to make a careful decision on the type of portfolio they are to invest in.

For companies being quoted in the stock market, it means that their shows trade less as they are less attractive to invest in. It has been established that there is a correlation between oil prices and the stock market (Javan & Vallejo, 2016). Such factor prices in the economy like wages and interest rates tend to offset energy costs. In reading future trends of the market, investors have to factor in factor prices. With increased consumption of oil product, prices in the market might rise.

With falling oil prices, the motor vehicle and other related oil energy industries experience a surge in their revenues and hence their share prices. The same case applied to the transport sector. However, there has not been an explicit correlational explanation as to the relationship between oil prices and overall stock market. It has been identified that in surprising cases, stock markets may fall with falling oil prices. In such cases where oil and stock prices go hand in hand, it is as a result of softening global aggregate demand. The relationship between stocks and oil is rather volatile. Prices may move in the same or opposite direction. As it stands, both prices seem to move in the same direction.

Time Value of Money and Falling Oil Prices

Time of value is an accounting concept that deals with what monetary benefit one would rather enjoy now rather than later. This concept has been so far been used in valuing investments and more so in the field of oil and accounting when such factors like interest rate and rate of return are put into account. Thus, the underlying question is, should one invest now or later in the oil industry as according to time value of money.

As previous research has shown, it is advisable to invest when oil prices are high because the interest rate is low and so is the tax rate. Thus, it can only be held that with the changing oil prices, investors should invest when oil prices are high to increase the returns in terms of present and future value of money.

Methodology

The research methodology used in this dissertation was qualitative, Triangulation/Mixed Review study utilizing convenience sampling research methodology. This research method involves data integration in that illustration, triangulation (convergent validation) and deep analysis are undeniable in this study paper. Mixed method of research involves combining aspects of both quantitative and qualitative research methods through triangulation whereby data from different sources are compared and analyzed to come up with the most reliable and appropriate conclusion and recommendation.

Triangulation, in this case, involves the use of diverse data and combining various research methods. This would go hand in hand with convenience sampling where convenient and pertinent data to the study will be analyzed. It is the most applicable method in studying real life scenarios through a detailed contextual analysis of a limited number of conditions or relationships.

The study design involved went hand in hand with the triangulation of different data sources in relations to a specific issue, phenomenon or situation with an aim to deeply understand and explain it of characteristics and other aspects like rationale and distribution. It combines the strengths and reduces weaknesses of using a single method. Through triangulation, convergence and divergence of data can be established thereof.

Discussion, Conclusion, and Recommendation

From the above analysis, it is only true to hold that falling prices have both short-term and long-term impacts on ordinary investors. Falling prices tend to result in high taxes, high-interest rates and more so a change in the stock market. It is thus important for investors to have a clear understanding of oil prices changes and the corresponding effects in that it ultimately affects the general economy in various ways. This paper should prove useful for ordinary investors and other stakeholders who are willing to seek information on oil industry and investments.

References

Javan, A., & Vallejo, C. (2016). Fundamentals, non‐fundamentals and the oil price changes in 2007–2009 and 2014–2015. OPEC Energy Review40(2), 125-154.

Nieh, C. C., & Yeh, C. Y. (2016). Relationship of Threshold Effect among Gold, Oil, and Exchange Rate.

Enriquez, L., Smit, S., & Ablett, J. (2015). Shifting tides: Global economic scenarios for 2015–25. McKinsey & Company.

Brunetti, C., Büyükşahin, B., & Harris, J. H. (2016). Speculators, prices, and market volatility. Journal of Financial and Quantitative Analysis51(5), 1545-1574.

D’Ecclesia, R. L., Magrini, E., Montalbano, P., & Triulzi, U. (2014). Understanding recent oil price dynamics: A novel empirical approach. Energy Economics46, S11-S17.

Alfaro, I., Bloom, N., & Lin, X. (2016). The Real and Financial Impact of Uncertainty Shocks.

Coudert, V., Couharde, C., & Mignon, V. (2015). On the impact of volatility on the real exchange rate–terms of trade nexus: Revisiting commodity currencies. Journal of International Money and Finance58, 110-127.

Brown, G., Chan, R., Hu, W. Y., & Zhang, J. (2017). Oil Price Movements and Risks of Energy Investments. The Journal of Alternative Investments19(4), 24-38.

Bohi, D. R., & Montgomery, W. D. (2015). Oil prices, energy security, and import policy. Routledge.

Sadorsky, P. (2014). Modeling volatility and correlations between emerging market stock prices and the prices of copper, oil and wheat. Energy Economics43, 72-81.

Basher, S. A., & Sadorsky, P. (2016). Hedging emerging market stock prices with oil, gold, VIX, and bonds: A comparison between DCC, ADCC and GO-GARCH. Energy Economics54, 235-247.

Nazlioglu, S., Soytas, U., & Gupta, R. (2015). Oil prices and financial stress: A volatility spillover analysis. Energy Policy82, 278-288.

Degiannakis, S., Filis, G., & Kizys, R. (2014). The effects of oil price shocks on stock market volatility: Evidence from European data. The Energy Journal35(1), 35-56.

Diaz, E. M., Molero, J. C., & de Gracia, F. P. (2016). Oil price volatility and stock returns in the G7 economies. Energy Economics54, 417-430.

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Community Economic Development

Community Economic Development

Title: Community Economic Development. Effective public administration is key to promoting community economic development. Community economic development is term used to describe collective action by members of a particular community to generate common solutions to their economic problems. Such initiatives may involve both small and large groups (Green & Haines, 2012). Public administration on the other hand refers to civic leadership of community affairs that is held directly responsible for executive roles (Calabrò & Della Spina, 2014). Public administration aims at promoting respect and contributing to the enhancement of the worth, dignity, and potential of members of the public. Effective public administration enhances the success of community economic development initiatives.

The model of the community development process, also often referred to as the asset model of development provides mechanisms to manage community based and development infrastructure. It is mainly concerned with the management of human resources (Patterson, Silverman, Yin, & Wu, 2016). It provides processes and practices that are aimed at promoting the effective and efficient management of human capacity in public service (Loh & Norton, 2015). The model also champions the making of human resource management (HRM) decisions that are accurate, fair, transparent, and free from political influence (Green & Haines, 2012). There are six major components of the model of the community development process. These include strategic planning, organizational design and classification, competency profile development, resourcing, learning, development, and certification, and leadership development.

Strategic planning requires that the business needs of a community be identified first before any investments are made. The community economic development program that is developed should target these gaps and needs. Strategic planning requires that all decisions be made based on existing facts (Christens & Inzeo, 2015). As a community developer, one should engage members of the public to determine their needs and work with them to develop solutions that best satisfy these needs. For example, the needs of an urban community vary from those of a rural society. Subsequently, programs to be rolled out in the two areas should vary to some extent.

Organizational design and classification is the second component of the model. It requires that standardized services and products be developed with the aim of providing an integrated and consistent approach to staffing. Subsequently, well defined and or organized job positions and streams are developed (Green & Haines, 2012). In community development, organizational design and classification is important since it helps in the division of work. Different persons are given specific responsibilities (Majee, Goodman, Reed Adams, & Keller, 2017). For example, a engineer working in a community development project should have clearly defined responsibilities.

Community Economic Development
Community Economic Development

Competence profile development is the third component of the model. It champions the development of competency based products that help define and support job success. As such, public administration managers are in a position to use profiles for the purposes of staffing (Majee et al., 2017). At the same time, employees are in a position to identify that which is required of them for them to get promotions (Calabrò & Della Spina, 2014). A community developer should be involved in the designing of learning programs fill the skill and knowledge gaps of the human resources. These programs should target all fields.

The fourth component of the model is resourcing. It involves the launching of collective recruitment and staffing programs. This helps increase access to qualified human resources. At the same time, it ensures that vacant positions are filled in a quick, effective, and efficient manner (Green & Haines, 2012). The model enables community developers to understand the need to have fully staffed team at all times. For example, it would be not make sense to run a community development program whose agenda is housing without an architect, an engineer, and an accountant.

Learning, development, and certification is the fifth component of the model. It develops programs that are aimed at enhancing the skills and capabilities of human resources (Patterson et al., 2016). It ensures that employees have access to all the programs and tools they need to improve their competencies and skills (Christens & Inzeo, 2015). As such, they are in a position to advance in their careers. A community developer must understand that change is inevitable. As such, they must always seek to update the skills and knowledge of their teams.

The last component of the model is leadership development. It involves expanding the capacity of individuals to enable them perform leadership roles (Patterson et al., 2016). In community development, this is important since it provides persons with the right attitudes and abilities to influence others positively (Calabrò & Della Spina, 2014). A community developer must understand the need to create strong leadership. They must mentor leaders who are to guide the implementation and maintenance of community based project (Majee et al., 2017). This is important to ensure the sustainability of these community economic development programs.

Zoning and Community Economic Development

Zoning and comprehensive planning continue to be important tools for community development. Zoning is a development regulation tool. It involves the division of the existing land into zones. Each zone is dedicated to a specific purpose. In community development, zoning is key in ensuring that the goals of the comprehensive plan are implemented in an effective and efficient manner (Green & Haines, 2012). Public administrators must be keen to ensure that zoning guidelines are adhered to. Through zoning, developers can improve their communities by encouraging the use of the existing land resources in a sustainable manner (Loh & Norton, 2015). Zoning promotes sustainability of development programs since it allocates land resources for all the needs of a community. For example, zoning ensures that members of a community have adequate land for residential, farming, and economic purposes.

Comprehensive planning is the process through which the goals and aspirations of a community are determined. It results in the development of a comprehensive plan. In community development, a comprehensive plan dictates public policy and in matters land use, housing, recreation, public utilities, and transportation (Green & Haines, 2012). Comprehensive plans may cover either a small or large geographical area (Loh & Norton, 2015). As a developer, one can use comprehensive planning to improve their communities by assessing their needs and working with them to seek appropriate and sustainable solutions (Christens & Inzeo, 2015). A developer must be keen to involve all members of a community in the planning process. This ensures that their comprehensive plan created has the support of all members of the community. Subsequently, the implementation process tends to be easy.

References

Calabrò, F., & Della Spina, L. (2014). The cultural and environmental resources for sustainable development of rural areas in economically disadvantaged contexts-economic-appraisals issues of a model of management for the valorisation of public assets. Advanced Materials Research, 869(1), 43-48.

Christens, B. D., & Inzeo, P. T. (2015). Widening the view: situating collective impact among frameworks for community-led change. Community Development46(4), 420-435.

Green, G. P., & Haines, A. (2012). Asset building and community development (3rd edn.). Newbury, CA: Sage Publications.

Loh, C. G., & Norton, R. K. (2015). Planning consultants’ influence on local comprehensive plans. Journal of Planning Education and Research35(2), 199-208.

Majee, W., Goodman, L., Reed Adams, J., & Keller, K. (2017). The We-Lead Model for Bridging the Low-Income Community Leadership Skills-Practice Gap. Journal of Community Practice, 3(1), 1-12.

Patterson, K. L., Silverman, R. M., Yin, L., & Wu, L. (2016). Neighborhoods of Opportunity: Developing an Operational Definition for Planning and Policy Implementation. Journal of Public Management & Social Policy22(3), 143.

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Federal Government United States

Federal Government

The federal government is a system of government in the United States that has got three main branches that are the legislative, the executive, and the judiciary. It splits up the power between the national and the local governments connected to each other by the national government. The constitution created a representative government that incorporates the three branches. It developed the federal system by restricting the civic government activities to a few areas, for example, collecting and paying taxes, controlling the commerce, lending money on credit, coming up with smaller courts, making currency, defense provision, and providing patents. The constitution encountered amendments for the 10th parliament, and it vested the other remaining powers to the states. Therefore, any power not given to the federal government remains to be the powers of the state or national government. The purpose of this paper is to examine the politics of the government cabinet, the bill of rights in the constitution, the public officials, and racial diversity in the learning institutions.

The first ten amendments to the United States Constitution constitute the bill of rights. It addresses the majority of the rights of the citizens and limits the federal government powers to protect the rights of all America citizens. The bill of rights protects the religious freedom, speech freedom, authority to bear and keep arms, the petition freedom, and the assembly freedom. It prevents self-discrimination, cruel punishment, and amongst all forbid the federal government from stripping the life any citizen, property or the liberty without following the law process. The rights that are in the Bill of Rights was intended for the federal government and not the local or state governments (Black, p. 35). The individuals’ rights safeguarded from the state interfering only by the institutions of the state themselves.

The new slaves entered after the American Civil War and this changed with the introduction of three amendments for the protection of their rights. Primarily, this forbids slavery and protect the voting rights from racial discrimination. The Supreme court rejected and refused this view stating that specific rights in the Bill of Rights are fundamental, when the state denies, it denies the law process. Every state safeguards the rights of every citizen. The antifederalists labeled the federalists as manipulative, hungry for power and dismissive of the peoples’ rights (Berkin, n.d. p. 21). Therefore, each state should protect the fundamental rights of all citizens within the state.

Federal Government and Congress

The committee system in the Congress is beneficial to the lawmaking process. The lawmaking process starts with a bill introduced then sent to the committee where the chairperson submits the bill to the subcommittee, and maybe the hearing can be held. The committee system is a method to provide the division of labor in the legislature and specialization. The committees and the subcommittees performs most of the legislature work in the Senate and the house. There is the committee formed called conference committee that constitutes an agreement between the Senate and the house on the maters of legislature actions. The house committee suggests the time taken on a debate for most bills. The committee system provided a solution problem of collection, that is, allowed the House to perform legislation. The system was effective in the enactment of bills of farm and public-works (Sinclair, p.23).

The president nominates the cabinet appointees to the government. The President does this before the inauguration process takes place. Most of the appointees have got a broad political relationship with the president regarding the party, or they are respected people due to their level of expertise and skills. I think the cabinet appointees should primarily be making their decisions and formulating opinions since the president requires them to perform (McKeever & Davies, p. 104). The civil servants are supposed to disband the political considerations and give advice which is neutral and free from political inclination. Since politics ended when the president was elected, then the work should begin, and every appointee is neutral of any political party and work for the state.

Federal Government United States
Federal Government United States

The politics and legal issues are so intertwined that one cannot separate as there is a thin line between them. Majority of the politicians have studied law and a political system founded on a majority rule was perceived as unwise because the societies include the more ordinary individuals than the elite thinkers. The supreme court bases their work on laws which are noticeable but should not include the composition of seasoned politicians since whenever there is a case involving a senior person in the government, he or she is swayed easily. The power of competence regarding law should only have the career jurists included in the composition of the court. The court is a representative of the democracy that provides the citizens its total belief in them.

I don’t agree with the fact that college or a university should not promote racial diversity during the admission process. The ethnic diversity supports racial discrimination which goes a long way into the society. In the United States, the institutions exercise slavery and segregation which restrict specific racial groups from getting into the colleges and universities. The non-Americans and other minority ethnic groups are left out of the education since the system will become selective against them. The admission should only be made available to those who deserve regarding merit and not racial diversity since there are those who deserve but they are from the ethnic minority groups. They undergo discrimination in their thirst for education.  

The “Revolving Door” laws have been criticized and accepted in the same measure. Those who support the system argue that the interconnection between public and private sectors enables pool cultivation of people with knowledge about policies and business which gives a benefit to both sides. There is knowledge exploitation by the new employers to achieve privileged access, and there are employment conflicts when senior officials get employment in the new institutions. The transition allows sharing of costs and pooling the information that the private companies would not get access (Harris, p. 166).

The public officials gain more favor regarding allowances in the fact new transitional allowances given for their independence. Also, on the other hand, this transition leads to the brain drain to some extent, the knowledge expertise when they leave moves with their talents to the new employers. The commission must prevent the interests from private sectors in buying the bids from the public officials by giving them high-income jobs once the public officials go out of the public service. Commissioners could exploit the initial status to influence the former staff on the representation of the new employees.

Voting should not be restricted to those with a college education. Primarily, this is entirely against democracy, and this could lead to people from a wealthy community leading the government for many years. The uneducated, the poor, unrepresented and the oppressed are discriminated and suffer forms of bad governance. Allowing the people to vote is a fundamental right in the U.S.A, and everyone should be entitled to participate in the voting process. Instead, the state should educate the people to make better decisions rather than restricting the uneducated from participating. Moreover, it would be unfair to the people who cannot afford to attend the college education and feel the desire to vote. I think in my opinion, there are innovators like Mark Zuckerberg and Bill Gates who never went to school but are great people in the society. They should be able to vote.

Regressive tax in the tax that occupies a more significant percentage as the income drops, while the progressive tax is the tax that takes a more significant income percentage as the income increases. The flat tax, on the other hand, occupies a fixed income percentage. I believe the flat tax is fair since the tax is directly proportional to the income, as the income increases the tax also increase but at the same rate as the tax. Therefore, no matter the income level, the tax remains proportional. Moreover, this cannot oppress those who are earning less, but the tax is higher. All the taxpayers especially in this category those earning less are taxed equally and do not feel the pinch so much taxation.

Works Cited

Sinclair, Barbara. Legislators, Leaders, And Lawmaking. Johns Hopkins University Press, 1998. Pp. 23

McKeever, Robert, and Phillip Davies. A Brief Introduction To US Politics. Taylor And Francis, 2014. Pp. 104

Harris, Paul G., ed. Routledge handbook of global environmental politics. Routledge, 2013. Pp. 166-167

Berkin, Carol. n.d. The Bill Of Rights. Pp. 21

Black, Hugo L. “The bill of rights.” NyUL Rev. 35 (1960): 865. Pp. 35

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Emerging Markets Project

Emerging Markets

The contemporary world economy gets its support from the phenomenon of the emerging markets and its consequential development of emerging markets multinationals (MNCs) (Sinkovics, et al. 167). The new re-engineering of the modern economic and political order is as a result of the state of international emerging markets that is much conspicuous in the recent past. According to the international business, the term emerging markets get referred to nations that are in constant motion and also have the capability of gaining a significant economic and political power (Cavusgil, Tamer, et al. 40).

The emerging economies showed the ability to endure a recession that bypasses even the major economies during the Financial Crisis that the world faced at the primary stages of the new millennium. They include the best emerging 20 (E20) countries selected based on their recorded GDP, the population, and the overall influence on both regional and international trade (Cavusgil, Tamer, et al. 46). For example, the E20 consists of Brazil, Chile, China, Argentine, Poland, Colombia, Saudi Arabia, South Africa, Malaysia, Mexico, Thailand, Russia, Philippines, Republic of Korea, South Africa, Turkey, Indonesia, India, Nigeria, and Iran. This report aims at examining the emerging markets from the E20’s enhanced economic growth, the ever-growing influence across the world economies, and increased technological advancements.

Emerging Markets and Economic Growth

The E20 savings are known to be dominated by a substantial and rapidly growing number of people. According to world census conducted recently, emerging markets population account for 50% of the total four billion estimated world population. For example, in a comparative perspective, 18% of the world’s population stays in OECD nations; an approximated 11% lives across the G7 countries which also recorded yearly population growth of a rate of 0.0051 of the total population (Cuervo-Cazurra, Alvaro, and Ravi Ramamurti 230). On the hand, E20 nations are also prone to an increase in annual population by 0.01 (Sinkovics, et al. 169).

Also, demographically, emerging markets consist of a community of the young generation who are at their prime ages. Even though the youths are demanding regarding the money allocated to the education and higher learning institutions, they act like a source of wealth to a country. For example, a learned young generation provides skilled and advanced technical know-how to their economy, the source of cheap labor to the available industries, and a potential market for the ready manufactured goods and services. Conversely, in the United States, Japan, and Europe the majority comprises of working age population. 

A nation with working age as the majority is at crossroads since the working age has the capability of ether impact the economy positively or negative (Cuervo-Cazurra, Alvaro, and Ravi Ramamurti 230). For instance, a country with a majority of working age must have implemented a beneficial education and healthcare system because the working class is aging very fast and the possibility of an increased dependency ratio. However, some of the E20 countries showcased an age structure that consists of a rapidly aging population such as China and Korea. Nevertheless, E20 states still well placed to have a productive working force that other developed economies (Cuervo, Alvaro, and Ravi 230).

Integration into the international Markets

With the high population in E20 countries, there are readily available markets for the produced goods and services (Hill, Charles, et al. 77). According to world consumer research conducted in 2010, the United States and Europe take the lead in the world consumer market. However, there is the likelihood that Asia will overtake them by 2030 due to rapidly growing emerging economies. The recent paradigm shift indicates how emerging economies are gaining firm ground across the international market arenas.

E20 countries learned a lot of world market influence between the early year 2000 and 2015 by a margin increase of approximately 6%. However, E20 nations have suffered currency volatility for not less than twenty years, which was worth declared a crisis among them. For example, Mexico, Asia, Russia, Argentina, and Brazil were the witnessed victims in the late 1990s. Fortunately, the emerging markets with the firm ground established in the contemporary international economy have the upper hand to maintain their positions (Hill, Charles, et al. 79). 

Furthermore, the emerging markets have increased their total exports to the world markets averagely 20% and that some countries stand as major commodities exporters. Emerging countries are the majority of the states with the most significant manufacturing products applying the advanced technology. For instance, China, Korea, and Malaysia use the highest technology in manufacturing their exports and that they also enjoy the lion’s share of FDI, therefore raising their international investments. The economic growth resulted in a well-consolidated world economy that boosted technology and innovation knowledge (Brannen, Rebecca and Susanne 141).

Technological Advancement in Emerging Markets

Growth and development of a nation must get measured by the level of technology and innovation present. Initially, high technology and innovation was only a reserve for the developed countries. However, in the current days, emerging economies have concentrated their efforts to improve their technological know-how through boosting research and development sector by providing resources and human capacity by embracing the right education system (Hill, Charles, et al. 79).  For instance, innovation improvements have greatly addressed the local problems to match the general atmospheres in the already developed countries.

Innovative cultures in emerging economies contributed to the development of new technology in the banking industry, telecommunication, and to the overall savings which not only benefited the locals but also spread to the rest of the world (Peng, Mike, and Sergey 12). Therefore, the emerging markets end up pioneers of some world innovations and technological advancements.

Emerging Markets Project
Emerging Markets Project

The E20 countries paid much attention in research and development funding both public and private sectors of the economy. Research and development are significant indicators of technology and innovation in any economy of the world (Peng, Mike, and Sergey 19). For instance, Korea and China are the leading nations which took more significant strides in R&D followed by Turkey and Malaysia.

Moreover, the emerging economies witnessed to embrace the right education system that promote innovative talents and that they use the most significant art of public expenditure on education. For example, Argentina, Mexico, South Africa, Malaysia, and Brazil were among the emerging nations with the highest education allocation. The E20 countries take education seriously since it is the critical factor that influences the full and sustainable economic growth.

Globalization

The emergence of interconnectivity of world nations through cooperation laid a firm ground for the emerging economies (Brannen, Rebecca and Susanne 139). The world’s economic and political order experienced a paradigm shift where countries were aiming to form multilateral cooperation resulting into formation of world developmental institutions like development bank and Asian Infrastructure Investment Bank and International Monetary Fund. The establishment of the last global institutions facilitated the emerging market’s contribution in global affairs, international trade, and investment (Brannen, Rebecca and Susanne 141).

Conclusion

The emerging economies managed to transform the global economy by constant and robust economic growth and the trend seeming to continue because of some reasons identified by this report. First, the emerging economies have both principal actors and regional powers than developed nations. Second, the majority of the emerging markets anchored the economic development on the right pillars such as technology and innovation.

Finally, these emerging economies enjoyed the current world readiness for international cooperation. Despite the possible challenges that particular emerging economy shall experience, there rise in general marked a milestone in the global landscape.

Work Cited

Brannen, Mary Yoko, Rebecca Piekkari, and Susanne Tietze. “The multifaceted role of language in international business: Unpacking the forms, functions and features of a critical challenge to MNC theory and performance.” Language in International Business. Palgrave Macmillan, Cham, 2017. 139-162.

Cavusgil, S. Tamer, et al. International business. Pearson Australia, 2014.

Cuervo-Cazurra, Alvaro, and Ravi Ramamurti, eds. Understanding multinationals from emerging markets. Cambridge University Press, 2014.

Hill, Charles, et al. Global Business Today Asia-Pacific Perspective. McGraw-Hill Education, 2017.

Peng, Mike W., and Sergey Lebedev. “Intra-national business (IB).” (2017): 241-245.

Sinkovics, Rudolf R., et al. “Rising powers from emerging markets? The changing face of international business.” 0969-5931 23.4 (2014): 675-679.

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Econometrics

Econometrics of France – General overview of the economy, identifying the main aggregate demand components that drive GDP growth

Econometrics – France is acknowledged due to its efforts in fighting poverty and improving employment among the citizens (Ciccone & Jarociński, 2010). The country is comprised of many sectors which work collaboratively to provide services and products to her citizens (Facchini & Melki, 2013). The country has been a member of IBRD since 1945 and was among the first country to receive their loan. The country has a population of over 66.8 million people as per the 2015 report. In overall, the country’s GDP was $2.4 trillion in 2015, which the country reported that it was growing at an annual rate of 1.2%.

Analyzing key econometrics such as GDP may not generally be the most pertinent synopsis of accumulated monetary execution for all economies, particularly when generation happens to the detriment of devouring capital stock (Ciccone & Jarociński, 2010). While GDP gauges in light of the generation approach are for the most part more dependable than assessments incorporated from the pay or consumption side, distinctive nations utilize diverse definitions, techniques, and reporting guidelines (UKDS, 2016). World Bank staff survey the nature of national records information and now and then make acclimation to enhance consistency with worldwide rules. All things considered, noteworthy disparities stay between universal guidelines and real practice (Sly & Weber, 2016).

Numerous measurable workplaces, particularly those in creating nations, confront extreme confinements in the assets, time, preparing, and spending plans required to deliver solid and far reaching arrangement of national records insights. Among the challenges confronted by compilers of national records is the degree of unreported financial action in the casual or optional economy. In creating nations a huge share of farming yield is either not traded (on the grounds that it is expended inside the family unit) or not traded for cash (Sly & Weber, 2016).

Private usage has usually been the driver of money related improvement in France and it coordinated the impact of the fiscal crisis in 2009. Regardless, in 2012, private use contracted unprecedented for over two decades in the aftermath of the crisis, amidst purchaser assurance levels that had debilitated and direct money related improvement rates (Facchini & Melki, 2013; Ciccone & Jarociński, 2010). After government use, which has remained by and large stable in the earlier decade, wander is the greatest portion of France’s budgetary advancement.

Econometrics theory was the GDP portion that was hit the hardest by the fiscal crisis in France and changed wander dove 9% in 2009. Taking after a ricochet back to 1.9% advancement in 2010, hypothesis has lamented starting now and into the foreseeable future and it contracted 0.8% in 2013. Moreover, France is a net shipper, in any case, the outside division littly affects the economy (Ciccone & Jarociński, 2010).

Quickly, organizations are the guideline benefactor to France’s economy, with more than 70% of GDP originating from this section. Immense subdivisions of organizations join the sparing cash and budgetary, security and tourism parts. Creating speaks to somewhat more than 10% of France’s GDP and France is an overall pioneer in the avionics, auto and lavishness stock undertakings (Ciccone & Jarociński, 2010). Disregarding the way that agriculture speaks to around 2% of French GDP, it is seen as a fundamental industry in France and is frequently the beneficiary of government gifts or protectionist plans (Facchini & Melki, 2013).

Econometrics – How well the country has managed to achieve the four macroeconomic objectives of high and stable economic growth, low unemployment, low inflation and avoidance of large balance of trade deficit.

There is a run of the mill see, as regularly as could be expected under the circumstances watched or reported by different economists is that France has a unique approach to her economy and operations. In fact, France is delineated as a something close to a revolt economy, where institutions and different staffs are in frequent strikes especially on matters that affect them collectively (Ciccone & Jarociński, 2010).

Like most myths, the intellectual economy myth – , in light of current conditions, executed by people with a grievance, or by people who have visited the country due to either economic interest or their personal interests. Different economic overviews or rather arguments have come up and each shows different result from the previous For each one of its deficiencies – and its qualities – however, all the economists tend to concur that France economy is healthy and well performing above average especially when compared with the G20 terms (UKDS, 2016).

Changing France is to an unprecedented degree troublesome to the time when some are imparting that nothing not another French resistance is required. According to a 2013 econometrics report by IMF, Hollande government was aiming to to cut down different demands by the French economy (Facchini & Melki, 2013); however this was qualified by a notice that more should be done to cut open spending, instead of raise responsibilities. Hollande has vowed to go basic on costs, to forsake putting any further un-convincing weight on French industry (Sly & Weber, 2016).

The failure of changing the current situation in France, has become one of the primary challenge that is undermining the country from attaining effective budgetting (Facchini & Melki, 2013); However, the approach that the government have left many economists talking, for instance, a 2013 report argued the following statements in regard to the France government.  

a) The working hours in most businesses located in France are mostly shorter than the time that European countries work. For instance, when in Germany the average working hours per year are 1904 while in France they are 1679.

b) Most employees in France retire earlier than employees in Germany, the typical retirement age in Germany is 62.3 while in France it is 60.3 and 64 in the United Kingdom.

c) In France, the employees take many events, and holidays off work than employees in Germany and UK do, specifically they take 7 days more than Germans do and 36 days more than British employees do. However, despite all the fact, the France economy remains competitive (UKDS, 2016).

One of the fundamental issues identified with France’s work markets is unmistakable and interminable business district that affiliations end up in when they endeavor to end a man from staff. Many say the fear of putting in two years in a business tribunal is a colossal execute for all the more little affiliations, who are in this way more slanted to spread brief contracts instead of persevering ones. While attempting to settle this Hollander will ensure to past what many would consider workable for a laborer to hold up a disagreeing of out of line dismissal, which starting now remains at two years after they were surrendered.

In an offer to urge boss to contract more staff, Hollande game-plans to offer a “securing prize” to self-representing endeavors. The course of action is to give some place among 1,000 euro and 2,000 euro for every power who is chosen with a remuneration of up to 1.3 times the national scarcest wage. The show is kick-start shrinking by adjusting the gathering coordinated wander holds commitment costs that may startle away executives, with Hollande’s party as to it to be much speedier than changing France’s social obligation laws for low paid labourers (Sly & Weber, 2016).

The report released by the business serve in France exhibited that the strategy approaches will target low-talented authorities, and will especially focus on change divisions, for instance, mechanized and environment. The spending strategy for plan has been connected by 80 million euro in 2016.

The present year’s measures will cost €2 billion, which the mister of reserve said would be “reimbursed in full” by meander holds from elsewhere. Hollande ensured that the measures would not be financed by cost rises.

A blend of fitting optional measures and altered stabilizers has padded the effect of the emergency. The meander force diminishment presented in the 2010 spending course of action is comparably welcome, yet extra spending ought to now be confronted. Laying out and plainly passing on a significant multiyear leave system is a need. The required solidifying addresses a chance to re-adjust open funds by cutting wasteful spending, developing legacy, property and carbon strengths and progress changing the favourable circumstances framework.

Identify and critically analyse 3 economic/political/demographic trends (Econometrics) that the country is experiencing and what the implications of these trends could be in the future.

Demographic trends in France

In 2030, the number of inhabitants in France will achieve 67.9 million, an expansion of 5.8% from 2015 (UKDS, 2016). Moderately high, yet declining, birth and ripeness rates, close by positive net movement, imply that France’s populace will build speedier and age slower than most nations in Western Europe in 2015-2030. France is a standout amongst the most urbanized nations in Western Europe and this will keep on being the situation in 2030 when 91.8% of its aggregate populace will be comprised of urban occupants.

The long haul steadiness of richness and birth rates (right around 800,000 yearly births, regardless of slight falls in 2011 and 2012) implies that the base of the French populace pyramid is still very expansive (Baltagi, 2011)While characteristic increment is still unmistakably positive, the maturing procedure is reflected in a rising number of yearly passing’s  as the populace with the most astounding dangers of biting the dust becomes bigger.

The diminishing in first social unions is measured by the entire of rates (total first marriage rate) or the general probability of first marriage. Some place around 1972 and 2012, the total first marriage rate tumbled from 91.7 to 46.6 first social unions for each 100 men and from 94.8 to 47.5 first social unions for every 100 women (Baltagi, 2011). Probability data show a strong decrease in the degree of social unions between never-married individuals up to age 50: it tumbled from 90 first social unions for each 100 never married men in 1972 to 53.5 in 2012, and from 93.4 first social unions for every 100 never-married women to 56.3 for that years

  1. (i) Estimate the consumption function for your chosen country and comment on your results

Yt = a + bXt

            Where Yt is aggregate consumption of the country in year t;

                        Xt is aggregate income (GDP) of the country in year t;

                        a is the linear intercept and b is the slope coefficient

[Note   Aggregate Consumption (Y) = GC + PC (government consumption expenditure plus Household consumption expenditure) (Year 2015)

Y = 23.9 + 07

    = 24.6

(ii) Write the estimated regression equation and comment on the results of the regression analysis

Taking values from the graph, we make a table consisting values of the recent 5 years (Excel Sheet below)

Econometrics Data
Econometrics Data

Use the formula

Where a=a and b = b

a = -138.67

b =-515.123n

Insert the values in the equation

            Yt = -138.67  – 515.123 Xt

            (iii) Calculate the confidence interval for b at 95% confidence interval. 

-512 * (1 – 0.95)

CI = 25.6

            (iv) Test the statistical significance of b

                        Exposes the error index

                        CI – Y

                        25.6 – 24.6

            = 1.0

            (v) Test the statistical significance of the model

The values are close to the mean of X have less leverages that outliers towards the edges.

(vi) Identify whether the error terms of the model are autocorrelated and/or heteroskedastic.

The error was auto-correlated, with 1.00 error index, which was explained by the value estimation and rounding off

References

Baltagi, B. (2011). Econometrics (1st ed.). Berlin: Springer.

Ciccone, A. & Jarociński, M. (2010). Econometrics & Determinants of Economic Growth: Will Data Tell?. American Economic Journal: Macroeconomics2(4), 222-246.

Facchini, F. & Melki, M. (2013). Efficient government size: France in the 20th century. EconometricsEuropean Journal Of Political Economy31, 1-14.

Sly, N. & Weber, C. (2016). Bilateral Tax Treaties, Econometrics and GDP Co-movement. Review Of International Economics.

UKDS,. (2016). Econometrics UKDS. Stat Metadata Viewer

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