Due to tensions that have brought international trade to a near standstill, the global economy in 2019 is on track for the weakest year of growth since the financial crisis. According to the International Monetary Fund, global growth is expected to drop to 3%, down from the estimate of 3.2%. Only two years ago in 2017, the global economy was growing at 3.8%. The IMF attributed the sharp slowdown over the past two years primarily
to rising trade barriers that have stunted manufacturing and investment
around the world. They now forecast that world trade volumes will only grow by 1.1% this year, less than half of the July estimate of 2.5%. The IMF's chief economist said "With central banks having to spend limited ammunition to offset policy
mistakes, they may have little left when the economy is in a tougher
spot.”
What can be done through either monetary or fiscal policy to put growth back on track? Can the United States influence global economic growth? If yes, how so?
It is interesting to see that some of the theories on long run growth we are learning in class are taking effect here. It seems that the increases in government spending by the Trump administration has caused a decrease in investment, ultimately leading to this decrease in our nation's growth.
ReplyDeleteUnfortunately I think all of our ammo has been used up from the pressure of Trump. Although he is going to use the economy to put himself back in office for another 4 years, it is not going to continue to grow at the rates that it has for another 4 years. I would much rather have him in office for a recession than any other candidate at the moment.
ReplyDeleteIf a contractionary fiscal policy was implemented then we could see a decrease in government spending. And a decrease in government spending could ultimately increase investment. We are experiencing a crowding out effect because of government spending, and the only way to mitigate the issue is simply by doing the opposite of crowding out.
ReplyDeleteTo encourage global and domestic economic growth, the United States’ should promote a contractionary fiscal policy that stresses a decrease in government spending. Due to its status as a large open economy, this contractionary fiscal policy will improve the global economy, by expanding global Investment and increasing Economic growth.
ReplyDeleteIt is unsurprising to me that with two of the largest economies in the world entangled in relations that limit growth, that the entire world's growth would slow down. My personal opinion on how we should address the slowdown is to come to a quick conclusion with the trade war with China that benefits both countries, or at least hurts both countries equally. Then the growth for both countries would go back to its natural rate and the world growth rate would increase.
ReplyDeleteOf course the US can influence global economic growth. However, with the current policies being more protectionist in nature, I fear this influence right now will not help move the global economy in an upward trend.
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