The Monetary Stimulus

There was no change to UK base interest rates this week with the Monetary Policy Committee holding rates at 5.0% for May. Across the Channel, the hyperactive (!) European Central Bank also kept policy rates constant for what now seems like an eternity! Thank heavens the UK remains outside the Euro Zone! Whilst policy rates are at 5% for the moment, this does not mean that monetary policy is not acting as a stimulus to one or more of the components of aggregate demand (C+I+G+X-M).

The overall stance of monetary policy includes the effects of base rate movements and also changes in the external value of sterling against a basket of other currencies. So whilst interest rates have edged lower in recent months we should also take into account the major depreciation of sterling against the Euro Zone with whome we do more than half of our trade. A falling pound acts as an important stimulus to the export sector of the economy, even though the boost is muted somewhat by a slowdown in economic growth in our export markets. Will the lower pound be a white knight for the faltering UK economy?

Revision notes on unemployment [20 May 2012]
Unit 2 Macro: Bank Cuts UK growth Forecast for 2012 [16 May 2012]
Grexit - Andrew Balls on Greece and the Euro [16 May 2012]
Unit 2 Macro: Model answer for revision data question [9 May 2012]
Unit 2 Macro: 10 Key Revision Topics for EdExcel [7 May 2012]
Unit 2 Macro: Exchange Rates Glossary [5 May 2012]
Unit 2 Macro: Monetary Policy and Inflation Glossary [5 May 2012]
Unit 2 Macro: Trade and Balance of Payments Glossary [5 May 2012]
Macro Revision - Key Statistics on the UK Economy [4 May 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 4 Macro: The Euro Zone Crisis (Revision) [22 Apr 2012]
Unit 2 Macro: Globalisation and the Growth of Ports [10 Apr 2012]
Unit 2 Macro: The UK Balance of Payments in 2011 [4 Apr 2012]
Unit 2 Macro: Revision on Interest Rates and the Exchange Rate [3 Apr 2012]
Unit 4 Macro: Floating and Managed Floating Exchange Rates [2 Apr 2012]
Unit 4 Macro: Pain in Spain as Fiscal Austerity Bites [1 Apr 2012]
Posen on slower growth in the UK compared to the USA [30 Mar 2012]
Unit 3 Micro: EU Imposes Further Price Cap on Mobile Phone Companies [29 Mar 2012]
Life in the Slow Lane - UK Growth in 2011 Lags the Euro Area [28 Mar 2012]
George Buckley at the Millfield Economics Society [28 Mar 2012]
Beyond the Bike - Monetary Policy in Africa [28 Mar 2012]
Unit 4 Macro: Evaluating 3 Years of Quantitative Easing [27 Mar 2012]
Unit 4 Macro: Video Resources on the Euro Crisis [10 Mar 2012]
Unit 4 Macro: Enlarging the EU [9 Mar 2012]
Unit 2 Macro: Policies to Drive Economic Recovery [9 Mar 2012]
Unit 2 Macro: News Videos on the German Economy [9 Mar 2012]
Unit 2 Macro: Might Oil Prices Bring another Recession? [4 Mar 2012]
Pinterest: Board on Developments in the EU Economy [19 Feb 2012]
Unit 4 Macro: King on the UK Economy [15 Feb 2012]
Unit 2 Macro: China’s Trade Engine is Spluttering [10 Feb 2012]
Martin Wolf on Global Shocks [10 Feb 2012]
Trucks are the new way of measuring debt [1 Feb 2012]
Unit 4 Macro: Russia Joins the WTO [22 Jan 2012]
Unit 4 Macro: France loses her AAA credit rating [15 Jan 2012]
Unit 1 Micro: Low Cost Airlines Beat the Recession [1 Jan 2012]
Unit 4 Macro: Exchange Rate Economics - Where next for the US Dollar? [31 Dec 2011]
European Economics: Resources on the CAP [28 Dec 2011]
The Eurozone Crisis Explained (again!) [22 Dec 2011]
Unit 4 Macro: Celebrating (?) Ten Years of Euro Notes and Coins [2 Dec 2011]
Beyond the Bike - The Value of Money [19 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Eurozone crisis - a selection of resources [12 Nov 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
Greek debt decision tree [25 Sep 2011]
Unit 4 Macro: Greek Economy at Default’s Door [25 Sep 2011]
Unit 2 Macro: Greece on the Brink of Default [25 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Mixing with the Nobel Economists [4 Sep 2011]
hiphopnomics [31 Jul 2011]
AQA ECON4 Context [20 Jun 2011]
AQA Macro: Remember to revise inflation [25 May 2011]
PIIGS on the chopping block? [24 May 2011]
AS Macro Key Term: Recession [23 May 2011]
AQA A2 Economics - European Context [23 May 2011]
EU Economics: Comparing the UK with Europe [14 May 2011]
Interest Rates Held at 0.5% once again [5 May 2011]
A2 Macro: Chinese investment in the EU [3 May 2011]
AS Micro: Rising Global Food Prices [2 May 2011]
Video Clips on the Chinese Economy [1 May 2011]
EU Enlargement - Evaluating the Impact [30 Apr 2011]
A2 Micro: EU Aviation - State Aid and State Ownership [28 Apr 2011]
AS and A2 Macro Revision: The China Effect [26 Apr 2011]
Focus on Ireland’s Economy [12 Apr 2011]
OCR F585 June 2011: Euro Area on the Rocks? [11 Apr 2011]
AS Macro Key Term: Monetary Policy Tightening [11 Apr 2011]
AS Micro: The volatile price of crude oil [9 Apr 2011]
A2 Macro: Paul Mason’s blogs on the Euro Crisis [7 Apr 2011]
ECB breaks rank and raises interest rates [7 Apr 2011]
EU Economics - Portugal Reaches for Bail Out [6 Apr 2011]
Focus on Poland [5 Apr 2011]
Tutor2u Visits Madrid! [4 Apr 2011]
AS Macro Key Term: Expansionary Monetary Policy [4 Apr 2011]
A2 Micro: Updates on Competition Issues [2 Apr 2011]
AS Macro Key Term: Relative deflation [2 Apr 2011]
OCR F585 June 2011: Competitiveness [31 Mar 2011]
OCR F585 June 2011: Data Charts (2) [30 Mar 2011]
OCR F585 June 2011: Data Charts [30 Mar 2011]
Pacific Peso Reaches 29 Year High! [30 Mar 2011]
Poor human capital in Portugal [25 Mar 2011]
Timetric: Currency movements against the Euro [16 Mar 2011]
Focus on Spain [16 Mar 2011]
Timetric: Comparative prices in the EU single market [15 Mar 2011]
EU Economics - Video Resources for Teaching [15 Mar 2011]
Timetric: Price convergence within the EU [13 Mar 2011]
Timetric: Unemployment Rates for Selected Countries [12 Mar 2011]
EU Economics: How far is the Eurozone away from being an OCA? [12 Mar 2011]
Ireland - Mass Unemployment and Shrinking GDP [10 Mar 2011]
EU Economics: Germany leads Euro Zone revival [25 Feb 2011]
AS Macro: What next for the pound? [14 Feb 2011]
5 Fresh Links: Videos to attract FDI [4 Feb 2011]
EU Economics: Hopes for a low carbon future in Europe [3 Feb 2011]
Globalisation - Peering into the MIST? [1 Feb 2011]
WTO finds Boeing guilty of using illegal subsidies [1 Feb 2011]
5 Fresh Links: Reforming the EU Common Agricultural Policy [25 Jan 2011]
Economics Q&A: Will the rise in VAT harm the UK’s economic performance? [17 Jan 2011]
EU Economics: Is 2011 the year the euro will fall? [9 Jan 2011]
Firefox overtakes IE in the EU Browser Market [5 Jan 2011]
Economics Q&A: Will the Government spending cuts affect inflation? [3 Jan 2011]
Economics Q&A: Why might Europe’s weaker economies struggle to grow in the next few years? [2 Jan 2011]

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