Economic Indicators

Housing starts lowest in months Housing starts are the number of new residential construction projects that a re being done at a given time. When housing starts are particularly low it could mean bad news for the economy and also for both large and small businesses. If houses are not being built, pep people are not spending money on the initial construction. If there's not construction, there a re no jobs being created. If there are no homes being built then their are no homebuilders esp. ding money on the items to furnish their homes.Therefore small and large businesses are not a able to generate business. 2. ) Fed lowers discount rate and interest rates tumble When the Federal discount rate is low, interest rates tend to be lower as well. This could be a bad indicator for the economy because most times lowering interest rates is a technique used to try to stimulate the economy. The economy only needs stimulated when it is NT doing so well. Once the interest rates are lowered people are more likely to be able to borrow w which will be read for the economy and for large and small businesses.When money is boo rowed, it will then be spent, creating a boost in the overall economy. 3. ) Retail sales up 4 percent over last month Retail sales being up is a very positive indicator for the economy. It means that t people are spending money, which means people are making money. This is also good n sews for both small and large businesses because when sales are higher in small business, more product must be ordered from the larger businesses. 4. ) Business debt down from last year Business debt being lower can be both a good and bad indicator for the icon mom.It's bad because it could mean that businesses are less confident and worried about t aging on more debt. It's good in the sense that overall, businesses are making enough money to eke pep themselves out of debt. This is especially good for small businesses. Less debt can be bad of r larger businesses that are invol ved with debt collection, for obvious reasons. 5. ) Businesses are buying more electronic equipment Businesses buying more electronic equipment could be both a bad and a go indicator.It's bad because it is indicating that some businesses are replacing people with electric Ionics or machines which will decrease the need for human labor. When that need is lowered it will show a decrease in the job market and ultimately raise unemployment rates. The buy Wing and selling of electronic equipment is good because with the higher demand for any type of product comes more jobs for the larger businesses, the manufacturers. It could also be good for both larger and small businesses, not just the retailers but also the tech support and repair b sinuses. Economic Indicators Housing starts lowest in months Housing starts are the number of new residential construction projects that a re being done at a given time. When housing starts are particularly low it could mean bad news for the economy and also for both large and small businesses. If houses are not being built, pep people are not spending money on the initial construction. If there's not construction, there a re no jobs being created. If there are no homes being built then their are no homebuilders esp. ding money on the items to furnish their homes.Therefore small and large businesses are not a able to generate business. 2. ) Fed lowers discount rate and interest rates tumble When the Federal discount rate is low, interest rates tend to be lower as well. This could be a bad indicator for the economy because most times lowering interest rates is a technique used to try to stimulate the economy. The economy only needs stimulated when it is NT doing so well. Once the interest rates are lowered people are more likely to be able to borrow w which will be read for the economy and for large and small businesses.When money is boo rowed, it will then be spent, creating a boost in the overall economy. 3. ) Retail sales up 4 percent over last month Retail sales being up is a very positive indicator for the economy. It means that t people are spending money, which means people are making money. This is also good n sews for both small and large businesses because when sales are higher in small business, more product must be ordered from the larger businesses. 4. ) Business debt down from last year Business debt being lower can be both a good and bad indicator for the icon mom.It's bad because it could mean that businesses are less confident and worried about t aging on more debt. It's good in the sense that overall, businesses are making enough money to eke pep themselves out of debt. This is especially good for small businesses. Less debt can be bad of r larger businesses that are invol ved with debt collection, for obvious reasons. 5. ) Businesses are buying more electronic equipment Businesses buying more electronic equipment could be both a bad and a go indicator.It's bad because it is indicating that some businesses are replacing people with electric Ionics or machines which will decrease the need for human labor. When that need is lowered it will show a decrease in the job market and ultimately raise unemployment rates. The buy Wing and selling of electronic equipment is good because with the higher demand for any type of product comes more jobs for the larger businesses, the manufacturers. It could also be good for both larger and small businesses, not just the retailers but also the tech support and repair b sinuses.

Oliver Twist the novel Essay

In Oliver Twist, the novel, Dickens uses a variety of language techniques to show how villainous Bill Sikes is. The vocabulary he uses is course and elementary. That, with the use of short, sharp sentences gives a fierce thuggish effect. In the film, Bill Sikes is calm in his words however with brutal with his actions. In the film adaptation he is also presented with a delicate, more human side rather than being pot rayed as a monster all the time, like in the novel. This is helped with the non-diegetic sound, to help create and eerie and tense atmosphere. In the novel, Dickens describes him as a ‘Robber, Housekeeper’ these negative words add to his person as wanting to be the alpha-male. The language Sikes uses is not thought out properly. He says whatever comes into his head and this is why he is always quick to reply. In the film, even though Nancy explains herself, he hits her, and only after hitting her he realises what he has done. In conclusion, the way that Bill Sikes is presented as a villain in both the original novel by Charles Dickens and the BBC film adaptation are quite different. The villainy and the traits of Bill Sikes are portrayed by the language used by Charles Dickens which is short and sharp for fast paced action. The interactions of Bill Sikes with the other characters in the scene and chapter in which Bill Sikes completely ignores Fagin’s warnings and is very brutal to Nancy. Furthermore his villainy is also enhanced by the author’s and the film maker’s craft and use of various devices such as non-diegetic music and how Bill Sikes is called various names in the novel and finally his presentation of a villain is also based upon how he treats Nancy and how he reacts to his surroundings. In the novel he is presented to far more villainous than he is in the BBC film adaptation as in the adaptation there is remorse and regret over Nancy’s death.

Research, define, and discuss what strategic philanthropy is and why Essay

Research, define, and discuss what strategic philanthropy is and why it is beneficial to organizations, as well as give one example - Essay Example It is also a creative planning process that does not just entail volunteerism and generalized charity giving, it is instead a system that requires monitoring, tracking, and strategic assessment to determine whether a philanthropy effort can be qualified a success (Putnam 2008). What does this mean? Take for example the business REDF, which is a company provider that offers technical assistance in order to help community members achieve workforce development. REDF goes a step beyond just general philanthropy: the organization has developed a total management tracking system to determine whether its workforce programs have made long-term differences in the lives of those who sought the technical support services (Brest, 2010). This is the main difference between strategic and general philanthropy, it seeks the long-term benefits either to the organization or to society as a means of building a more positive future and knowing whether the effort is worth the investment or the cost. Strategic philanthropy is beneficial to the organization because it can give consumers, business leaders, or general community citizens a more positive view about the responsibility and values of a company. Some individuals in society believe that businesses should share their wealth and expertise with others less fortunate, and strategic philanthropy efforts can influence their purchasing decision-making behavior toward the firm. A positive consumer or social attitude about a business can help the organization achieve more long-term profitability or gain better contracts with like-minded business leaders in many different industries. It can, in some instances, even improve relationships with government members who are already responsible for securing the welfare of their constituents, thus allowing for political endorsements in favor of the organization. It should be said, then, that strategic philanthropy is a vital component

Oligopoly and how it deals with competitive forces it faces Essay

Oligopoly and how it deals with competitive forces it faces - Essay Example There are several strategies that the oligopolies apply to deal with the forces of competition. The first strategy applied by an Oligopoly and to deal with competitive forces it faces, is Price fixing. Price fixing refers to a situation where the main large firms that are operating in the market agrees to set the price of the products they offer at a certain level, through collusion, which in turn serves to dismantle the whole market by stifling any operations of the free market concept (Baye, 2010). The oligopoly achieves this through controlling the demand and supply of the products they offer, since the other market operators are small and therefore cannot meet the market needs of the product or service. This strategy shifts the prices from the existing price level, to a price level that destabilizes the market and disorients the other small market operators (Baye, 2010). This effectively eliminates the competition emanating from the small firms. Limit pricing is yet another strategy that is applied by oligopoly to deal with competitive forces that faces it. This entails a situation where the oligopoly fixes the prices at the lowest possible level, which makes the market very unattractive for other market players, such that they opt out of the market, since their attempt to operate at that market will not earn them any profit, and may even lead to losses (Baye, 2010). Through applying this strategy, the oligopoly manages to move the competitors out of the market, taking the advantage of the economies of scale of production, because it is a large firm. This way, the oligopoly is left operating singly in the market, and can therefore increase the prices to the highest level possible; to make-up for the duration it was fighting competition, and thus did not earn profits (Baye, 2010). Tying is another strategy that is applied by the oligopoly to overcome the competing forces that it faces, through

Examine the consequences of the establishment of a system of universal Research Paper

Examine the consequences of the establishment of a system of universal health care - Research Paper Example Nevertheless, there are difficulties ahead. There are two ways to implement a program of universal healthcare. The first is to have the government pay for all necessary healthcare expenses as is done in Canada. This is sometimes called the single payer method. Healthcare is centrally rationed and is available to all by dint of citizenship or residency. This is a good method of delivering the service—even if it is very expensive—but it is hard to implement in a highly developed economy such as the United States'. The second method is to force insurance companies to insure everyone. Normally, insurers don't like people who have preexisting conditions which make them risky. The government can create laws that force them to offer insurance anyway. Usually, the insurers will receive a subsidy to help them out. Before Obamacare passed, many liberals sought a pure public option. But is a public option such a great step forward? With the cost of healthcare rapidly accelerating, it may be too taxing for many countries to implement. Even in Canada, there is an increasing movement towards private clinics (Kraus).

Economic read an article Essay Example | Topics and Well Written Essays - 1250 words

Economic read an article - Essay Example In as much as many governments are institutions set on social contracts, there is a serious failure in the effectiveness to deliver according to set standards granted by the provisions of the social contracts. According to Leeson, a legitimate social contract should attest to three chief concerns. First, the contact must serve the purpose of granting political power. I should be in accordance with the joint consent of all subjects or stakeholders whose interest are represented in the contract. The main intent of the contract should be to facilitate social collaboration. The key consideration in the formation of a social contract is its aim of creating a government (Leeson 444). Leeson identifies the second most important feature of a social contract while referring to the original state before the formulation of the social contract. A social contract should serve the purpose of bringing the various stakeholders in the contract from a situation of no prior contract. The people whose i nterests are expressed in the contract should be in need a forum that can attend to their claims including their appeals. This, according to Leeson, is fundamental since it eliminates the possibility of conflicts and enhances sovereignty. If there is an existing sovereign body and an agreement is drafted which is legitimate, it does not qualify as a social contract. Instead, it is a contract. It does not replace the social contract that existed prior to its formation and, therefore, only remains as a contract. The third characteristic of social contracts identified by Leeson is the recognition that the agreement resulted from voluntary acceptance and approval by all parties subject to its provisions. Should any member of the society expresses disapproval of the social contract, then it no longer becomes a social contract. Every member whose welfare and other aspects of life are subject to the provisions of the social contacts should consent to it (Leeson 445). Disapproval by even on e member of the society renders it unbinding to the entire population affected by it. Should there be part of the population that is in disagreement, at the time of signing, then it should constitute part of the population not bound by the provisions of the contract. Following the absence of the three prerequisites that make up a social contract in most governments, Leeson argues that not all social contracts are genuine. In Leeson’s account, early social contracts that formulated most present day governments did not meet the three requirements that should be the threshold of a legitimate social contract. Following the argument that social contracts should bear the main objectives of forming a government, Leeson renders these early contracts as out of the desired intention. Their formation was legitimately promoted by the desire to gain political rule over the people. Further concerns emanate from the approval of conceptual unanimity that never follows its provisions, as well . The emergence of pirate societies, as outlined by Leeson, did restore the legitimacy of the social contract concept. This was a possibility given the fulfillment of actual unanimity that is vital in meeting the threshold of a social contract based on the three pillars of its formation. As Leeson states, the system of constitutional democracy embraced among the

Critically discuss the development of green and ethical accounting Essay

Critically discuss the development of green and ethical accounting practices as a new accounting discipline - Essay Example 36). Anticipations of high principles of ethical corporate conduct are rising as corporations face economic and legal penalties for pursuing illegal and unethical practices. Businesses cause environmental degradation, which have negative impacts on society. Environmental degradation is an ethical concern among businesses and society. As a result, businesses have developed corporate strategies in order to address the growing concern of unethical behavior such as environmental degradation (Gowthorpe & Blake 1998, p. 178). This paper seeks to discuss the development of environmental and ethical bookkeeping practices as a new bookkeeping discipline. Green and Ethical Accounting Practices The advantage of corporate environmental bookkeeping initiative is recognized the capability, to establish and create consciousness regarding expenditures related to surroundings, which in turn assists in identifying the methods for avoiding and reducing such costs. This corporate environmental initiativ e has assisted in the improvement of the environment. The ecological costs that arise as a result of the financial results of a company’s operation may be established by means of environmental bookkeeping tool. The operational performance of an organization may be established with an aid of certain processes such as documentation and exposure of emissions of conservatory gases (Farouk, Cherian & Jacob 2012, p. 37). Aronson and Lofgren (2010, p. 21) argue that society commends for the ecological responsible conduct from businesses and government by investigating the environmental degradation and tragedies of world’s ecosystem. Businesses are given this responsibility by the society for solving the ethical troubles by considering either preserving the environment or promoting their profit. Wells (2013, p. 13) argues that there ought to be homogeneous and quantitative measures with an aim of controlling the business activities polluting the surroundings before executing a condition in which businesses are required to clean the effluence emitted by them. It is better preventing environmental degradation rather than avoiding since most of the ecological damages may not be restructured. Wells (2013, p. 18) recommends the establishment of environmental bookkeeping system in order to avert environmental degradation. The system deems the monetary measures, which have an impact on energy generation and utilization on environment. As a result of the process, the energy plant that highly affects natural resources is deemed and consequent actions needed are conducted. He also recommends that ethical predicaments may be resolved when ecological stewardship is put in terms of monetary way, and that achieves extra significance from business. The significance of the ecological predicaments has been augmented, as a result, of the continuous degradation of ecosystem and increasing ecological tragedies. Schaltergger & Burritt (2000, p. 44) argues that in order to en tail ecological predicaments in normal life it is imperative to consider these predicaments with respect to legal, technical, economic, financial and accounting levels. In view of the ecological factors in terms of the economy for instance costs of products and services,

Child Pschology Essay Example | Topics and Well Written Essays - 2500 words

Child Pschology - Essay Example However, for the ethics to be considered there are several dimensions that need to be considered. Each of these are based on the types of interactions which occur, ethical considerations associated with this and the unique situations that are associated with children in a given environment. Ethical Issues of Researchers The problems that arise with researchers are based on ethical considerations which occur as individuals are collecting data within a given field. As the data is collected, it becomes easy to change the perspectives of those that are studying while allowing the impact to alter with the study that is done. This raises ethical concerns for several reasons. The first is based on the impact that occurs when a researcher is on the scene. This can change the scenario of what is occurring. If the data is being collected by observation or interaction, then it may not be consistent with the expected results of those that are in the scene regularly. The ethical question then is concerned with how much a researcher can affect the outcomes of a given study and what the participation leads to. Personal changes, building relationships with others and interacting with the expectation to change things for the better while changing the data and the outcome of the research which is involved (Dennis, 2009, pg. 131). The concept of intervention as an ethical issue is one which can alter the data being collected on a variety of levels. This is dependent on the type of study conducted as well as the level of influence which occurs. The first is with interpersonal interventions, which is inclusive of creating relationships with other individuals involved in the study, specifically which is done with any interactions for the study and which is easily done with the study over a longer period of time. Administrative interventions are also considered, specifically which relates to individuals who have a sense of power over a given institution and which can begin to change or change the data within a given study. Enactment and modeling are also considered, both which are dependent on action based participation in the environment, all which specifically can lead to changed results within the environment. This may change the general way in which individuals would interact, may change the results of the study and questions the intention of finding relevant data without trying to alter the data for the research study (Dennis, 2009, pg. 132). The interventions which occur in research are not only important to note from the general changes which occur, but also the extent to which these can alter. When working with a general population, there may be the same responses which occur while changing only a few responses. However, when working with vulnerable populations or when seeking out answers or change with interpersonal relationships, it changes the data which is collected. There is a difference which occurs among the intervention types, specifically which can alter the data. If the population remains more vulnerable, then the integration of data can easily be manipulated with the researcher going in to make changes within a given society, as opposed to collecting the necessary data (Fisher, 1993, pg. 17). Ethical Issues with Children and Youth When a

Business Economics Essay Example for Free

Business Economics Essay Cindy wants to invest in a new business that involves the installation of solar panels. In order to make an informed decision on this business venture, she will need to review potential profit/loss in the solar panel industry by considering future prospects for this type of business. Cindy also needs to decide whether she will invest her own funds or borrow the money to start the business. The imminent growth of the solar photovoltaic (PV) industry is almost certain. When observing the rising costs of coal and natural gas prices, the decrease of PV system costs, and the government support of solar technology, the PV market looks to have a significant increase in volume over the next few years. According to SolarBuzz, a website dedicated to Solar Power and Energy, The solar PV industry has reached a critical tipping point, with end-market demand hitting record levels almost every quarter. This growth is being driven by leading module suppliers and project developers that returned to profitability during 2013, and which have now established highly-effective global sales and marketing networks.† (NPD Group, Inc., 2013) The article also states that â€Å"demand in Q1’14 will also achieve record-breaking status, as the strongest first-quarter ever seen by the PV industry.† (NPD Group, Inc., 2013) The cost of production for solar panels has decreased significantly. â€Å"The average cost for tier 1 solar photovoltaic manufacturers is expected to fall 6% during 2014, continuing the downward trend set in place since 2008, bringing the overall cost to a record low of $0.20 per watt, according to the latest research from NPD. (NPD Group, Inc., 2013) Further consumer incentives include lower utility bills, increased tax credits and higher resale values. â€Å"Homes with solar-power system using photovoltaic (PV) panels sell for an average of $24,705 more than homes without PV systems, research finds.† (Tanaka, 2014) The government supports the concept of solar power and aims to make it a major energy source. â€Å"Solar power as cheap as coal†¦ that is the holy grail of the solar power industry† (R. Glenn Hubbard, 2012) Government support includes generous subsidies to the consumer and producers of the PV industry. â€Å"Government agencies, utilities and others offer a variety of tax credits, rebates and other incentives to support energy efficiency, encourage the use of renewable energy sources, and support efforts to conserve energy and lessen pollution.† (Energy, 2014) I see four main factors influencing the price elasticity of demand: †¢Availability of close substitutes. Are there many available close substitutes for solar panels? The demand will tend to be elastic if Cindy and her customer can switch among the various types of PV’s for the same desired feature. †¢Are PV’s a necessity or a luxury? Currently, PV’s would be considered an elastic form of energy because there are other forms of electricity (coal/power plants). We once considered personal computers a luxury and they are now a necessity. Perhaps PV’s will be viewed the same way in the future. †¢How much of my income will PV’s consume? A large portion of consumer’s income equals elasticity. What portion of income can your client devote to the cost of solar panels? If it is a large share (elastic), what tradeoffs will client need to consider to make it a worthwhile purchase? †¢What is the time horizon when making decisions on PV’s? PV systems have productive life cycles of 30-50 years. (Brownson, 2014) A longer time horizon is said to be elastic. Recommendations Upon review of various criteria such as elasticity of demand, cost of production, etc, I would encourage Cindy to pursue this business venture. This sector is set to grow exponentially in the future. The fall in solar PV prices as well as other incentives will cause higher demand for  installation. This will benefit Cindy’s new business venture by bringing more installation business and lower input costs. This can be seen in the demand supply figure: It also makes good economic sense for Cindy to borrow money for her solar panel business venture as the government provides various subsidies to businesses involved in clean energy. â€Å"In total, the federal energy tax subsidies will cost more than $16 billion in 2013, up from only $5 billion in 2005.† (Bastach, 2013) Cindy can benefit from a piece of the clean energy subsidy pie. Bibliography Bastach, M. (2013, March 13). Most energy tax subsidies go toward green energy, energy efficiency. Retrieved from The Daily Caller: http://dailycaller.com/2013/03/14/cbo-most-energy-tax-subsidies-go-toward-green-energy-energy-efficiency/ Brownson, J. (2014, May 25). Department of Energy and Mineral Engineering. Retrieved from Penn State University: https://www.e-education.psu.edu/eme810/node/593 Energy, U. D. (2014, may 25). Tax Credits, Rebates, and Savings. Retrieved from Energy.gov: http://energy.gov/savings NPD Group, Inc. (2013, December). Solarbuzz. Retrieved from Solarbuzz: http://www.solarbuzz.com/news/recent-findings/strong-growth-forecast-solar-pv-industry-2014-demand-reaching-49-gw R. Glenn Hubbard, A. P. (2012). Economics. VitalSouce bookshelf version. Tanaka, S. (2014, May 22). Payback Time for Solar-Power Energy Systems. Retrieved from The Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052702304198504579571960667560156?mg=reno64-wsjurl=http%3A%2F%2Fo nline.wsj.com%2Farticle%2FSB10001424052702304198504579571960667560156.html

Pricing Strategy Essay Example for Free

Pricing Strategy Essay Pricing refers to the process of setting a price for a product or service and more than any other element of your marketing mix, will have the biggest impact on the amount of profit you make. Developing an effective pricing strategy is a critical element of marketing because pricing is the only element of the marketing mix that creates sales revenue; the other elements create costs and sales volume. An effective pricing strategy will help you: meet your profit objectives meet or beat your competitors’ prices retain or increase your market share match the image or reputation of your business, product or service match your offer to market demand To arrive at a price for your product or service you’ll need to: Establish what it costs to offer and deliver your products. Without this knowledge, you’ll have no idea whether your prices are sufficient to not only cover all your costs, but to return a profit. Few businesses have failed because their prices are too high, however, many have folded because their prices werent high enough to cover costs or generate a profit. Conduct market research to establish what price your competitors are charging and what is the optimum price customers would be willing to pay for your product. Your price will inevitably fall somewhere between that which is too low to produce a profit and that which is too high to generate any demand. The pricing structure A pricing structure consists of a base (or list) price and a variety of price modifiers which depend on the type of product you are selling and the type of market in which you operate. The most common price modifiers are outlined below: Quantity discount – an incentive to buy more. Settlement discount – an incentive to pay quickly. Promotional discount – a discount for a specific period of time. Seasonal discount – an incentive to clear seasonally sensitive stock. Cash rebate – an after-sale incentive linked to a specified target. Ranging allowance – paid to a reseller in return for them stocking your product. Promotional allowance – for participation in a promotional campaign. Delivery fee – an amount you charge for delivering the product. Credit card fee – an amount you charge on credit card purchases. At the end of the day, your objective should be to achieve the best possible price for your products or services taking into account: The value they provide for your customers – ie: how they satisfy their needs and wants in terms of features, benefits, utility value and prestige. Your cost structure – what is your break-even point and how much profit do you want to make? Go to the Financial section for more information on calculating your break-even point and determining profit targets. The competitive environment – what do your competitors charge for similar products and services? Your competitive advantage – do the products or services provide advantages that warrant a price premium? The economic and market environment – what is the level of demand in your industry? A business can use a variety of pricing strategies when selling a product or service. The Price can be set to maximize profitability for each unit sold or from the market overall. It can be used to defend an existing market from new entrants, to increase market share within a market or to enter a new market. Businesses may benefit from lowering or raising prices, depending on the needs and behaviors of customers and clients in the particular market. Finding the right pricing strategy is an important element in running a successful business.[1] Method of pricing in which all costs are recovered.The price of the product includes the variable cost of each item plus a proportionate amount of the fixed costs. Contribution margin-based pricing[edit] Main article: Contribution margin-based pricing Contribution margin-based pricing maximizes the profit derived from an  individual product, based on the difference between the products price and variable costs (the products contribution margin per unit), and on one’s assumptions regarding the relationship between the product’s price and the number of units that can be sold at that price. The products contribution to total firm profit (i.e. to operating income) is maximized when a price is chosen that maximizes the following: (contribution margin per unit) X (number of units sold). In cost-plus pricing, a company first determines its break-even price for the product. This is done by calculating all the costs involved in the production, marketing and distribution of the product. Then a markup is set for each unit, based on the profit the company needs to make, its sales objectives and the price it believes customers will pay. For example, if the company needs a 15 percent profit margin and the break-even price is $2.59, the price will be set at $2.98 ($2.59 x 1.15).[2] Creaming or skimming[edit] In most skimming, goods are sold at higher prices so that fewer sales are needed to break even. Selling a product at a high price, sacrificing high sales to gain a high profit is therefore skimming the market. Skimming is usually employed to reimburse the cost of investment of the original research into the product: commonly used in electronic markets when a new range, such as DVD players, are firstly dispatched into the market at a high price. This strategy is often used to target early adopters of a product or service. Early adopters generally have a relatively lower price-sensitivity this can be attributed to: their need for the product outweighing their need to economise; a greater understanding of the products value; or simply having a higher disposable income. It will maximize profits for the better of the company. This strategy is employed only for a limited duration to recover most of the investment made to build the product. To gain further market share, a seller must use other pricing tactics such as economy or penetration. This method can have some setbacks as it could leave the product at a high price against the competition.[3] Decoy pricing[edit] Method of pricing where the seller offers at least three products, and where two of them have a similar or equal price. The two products with the similar prices should be the most expensive ones, and one of the two should be less attractive than the other. This strategy will make people compare the options with similar prices, and as a result sales of the most attractive choice will increase.[4] Freemium[edit] Main article: Freemium Freemium is a business model that works by offering a product or service free of charge (typically digital offerings such as software, content, games, web services or other) while charging a premium for advanced features, functionality, or related products and services. The word freemium is a portmanteau combining the two aspects of the business model: free and premium. It has become a highly popular model, with notable success. High-low pricing[edit] Method of pricing for an organization where the goods or services offered by the organization are regularly priced higher than competitors, but through promotions, advertisements, and or coupons, lower prices are offered on key items. The lower promotional prices are designed to bring customers to the organization where the customer is offered the promotional product as well as the regular higher priced products.[5] Limit pricing[edit] Main article: Limit price A limit price is the price set by a monopolist to discourage economic entry into a market, and is illegal in many countries. The limit price is the price that the entrant would face upon entering as long as the incumbent firm did not decrease output. The limit price is often lower than the average cost of production or just low enough to make entering not profitable. The quantity produced by the incumbent firm to act as a deterrent to entry is usually larger than would be optimal for a monopolist,  but might still produce higher economic profits than would be earned under perfect competition. The problem with limit pricing as a strategy is that once the entrant has entered the market, the quantity used as a threat to deter entry is no longer the incumbent firms best response. This means that for limit pricing to be an effective deterrent to entry, the threat must in some way be made credible. A way to achieve this is for the incumbent firm to constrain itself to produce a certain quantity whether entry occurs or not. An example of this would be if the firm signed a union contract to employ a certain (high) level of labor for a long period of time. In this strategy price of the product becomes the limit according to budget. Loss leader[edit] Main article: Loss leader A loss leader or leader is a product sold at a low price (i.e. at cost or below cost) to stimulate other profitable sales. This would help the companies to expand its market share as a whole. Marginal-cost pricing[edit] In business, the practice of setting the price of a product to equal the extra cost of producing an extra unit of output. By this policy, a producer charges, for each product unit sold, only the addition to total cost resulting from materials and direct labor. Businesses often set prices close to marginal cost during periods of poor sales. If, for example, an item has a marginal cost of $1.00 and a normal selling price is $2.00, the firm selling the item might wish to lower the price to $1.10 if demand has waned. The business would choose this approach because the incremental profit of 10 cents from the transaction is better than no sale at all. Market-oriented pricing[edit] Setting a price based upon analysis and research compiled from the target market. This means that marketers will set prices depending on the results from the research. For instance if the competitors are pricing their products at a lower price, then its up to them to either price their goods  at an above price or below, depending on what the company wants to achieve. Odd pricing[edit] In this type of pricing, the seller tends to fix a price whose last digits are odd numbers. This is done so as to give the buyers/consumers no gap for bargaining as the prices seem to be less and yet in an actual sense are too high, and takes advantage of human psychology. A good example of this can be noticed in most supermarkets where instead of pricing at $10, it would be written as $9.99. This pricing policy is common in economies using the free market policy. Pay what you want[edit] Main article: Pay what you want Pay what you want is a pricing system where buyers pay any desired amount for a given commodity, sometimes including zero. In some cases, a minimum (floor) price may be set, and/or a suggested price may be indicated as guidance for the buyer. The buyer can also select an amount higher than the standard price for the commodity. Giving buyers the freedom to pay what they want may seem to not make much sense for a seller, but in some situations it can be very successful. While most uses of pay what you want have been at the margins of the economy, or for special promotions, there are emerging efforts to expand its utility to broader and more regular use. Penetration pricing[edit] Main article: Penetration pricing Penetration pricing includes setting the price low with the goals of attracting customers and gaining market share. The price will be raised later once this market share is gained.[6] Predatory pricing[edit] Main article: Predatory pricing Predatory pricing, also known as aggressive pricing (also known as undercutting), intended to drive out competitors from a market. It is  illegal in some countries. Premium decoy pricing[edit] Method of pricing where an organization artificially sets one product price high, in order to boost sales of a lower priced product. Premium pricing[edit] Main article: Premium pricing Premium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation, are more reliable or desirable, or represent exceptional quality and distinction. Price discrimination[edit] Main article: Price discrimination Price discrimination is the practice of setting a different price for the same product in different segments to the market. For example, this can be for different classes, such as ages, or for different opening times. Price leadership[edit] Main article: Price leadership An observation made of oligopolistic business behavior in which one company, usually the dominant competitor among several, leads the way in determining prices, the others soon following. The context is a state of limited competition, in which a market is shared by a small number of producers or sellers. Psychological pricing[edit] Main article: Psychological pricing Pricing designed to have a positive psychological impact. For example, selling a product at $3.95 or $3.99, rather than $4.00. There are certain price points where people are willing to buy a product. If the price of a product is $100 and the company prices it as $99, then it is called  psychological pricing. In most of the consumers mind $99 is psychologically ‘less’ than $100. A minor distinction in pricing can make a big difference in sales. The company that succeeds in finding psychological price points can improve sales and maximize revenue. Target pricing business[edit] Pricing method whereby the selling price of a product is calculated to produce a particular rate of return on investment for a specific volume of production. The target pricing method is used most often by public utilities, like electric and gas companies, and companies whose capital investment is high, like automobile manufacturers. Target pricing is not useful for companies whose capital investment is low because, according to this formula, the selling price will be understated. Also the target pricing method is not keyed to the demand for the product, and if the entire volume is not sold, a company might sustain an overall budgetary loss on the product. Time-based pricing[edit] Main article: Time-based pricing A flexible pricing mechanism made possible by advances in information technology, and employed mostly by Internet based companies. By responding to market fluctuations or large amounts of data gathered from customers ranging from where they live to what they buy to how much they have spent on past purchases dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customer’s willingness to pay. The airline industry is often cited as a dynamic pricing success story. In fact, it employs the technique so artfully that most of the passengers on any given airplane have paid different ticket prices for the same flight.[7] Value-based pricing[edit] Main article: Value-based pricing Pricing a product based on the value the product has for the customer and not on its costs of production or any other factor. This pricing strategy is frequently used where the value to the customer is many times the cost of  producing the item or service. For instance, the cost of producing a software CD is about the same independent of the software on it, but the prices vary with the perceived value the customers are expected to have. The perceived value will depend on the alternatives open to the customer. In business these alternatives are using competitors software, using a manual work around, or not doing an activity. In order to employ value-based pricing you have to know your customers business, his business costs, and his perceived alternatives.It is also known as Perceived-value pricing. Other pricing approaches[edit] Other pricing strategies include Yield Management, Congestion pricing and Variable pricing. Nine laws of price sensitivity and consumer psychology[edit] In their book, The Strategy and Tactics of Pricing, Thomas Nagle and Reed Holden outline nine laws or factors that influence how a consumer perceives a given price and how price-sensitive they are likely to be with respect to different purchase decisions. [8][9] They are: Reference Price Effect – buyer’s price sensitivity for a given product increases the higher the product’s price relative to perceived alternatives. Perceived alternatives can vary by buyer segment, by occasion, and other factors. Difficult Comparison Effect – buyers are less sensitive to the price of a known or more reputable product when they have difficulty comparing it to potential alternatives. Switching Costs Effect – the higher the product-specific investment a buyer must make to switch suppliers, the less price sensitive that buyer is when choosing between alternatives. Price-Quality Effect – buyers are less sensitive to price the more that higher prices signal higher quality. Products for which this effect is particularly relevant include: image products, exclusive products, and products with minimal cues for quality. Expenditure Effect – buyers are more price-sensitive when the expense accounts for a large percentage of buyers ’ available income or budget. End-Benefit Effect – the effect refers to the  relationship a given purchase has to a larger overall benefit, and is divided into two parts: Derived demand: The more sensitive buyers are to the price of the end benefit, the more sensitive they will be to the prices of those products that contribute to that benefit. Price proportion cost: The price proportion cost refers to the percent of the total cost of the end benefit accounted for by a given component that helps to produce the end benefit (e.g., think CPU and PCs). The smaller the given components share of the total cost of the end benefit, the less sensitive buyers will be to the components price. Shared-cost Effect – the smaller the portion of the purchase price buyers must pay for themselves, the less price sensitive they will be. Fairness Effect – buyers are more sensitive to the price of a product when the price is outside the range they perceive as â€Å"fair† or â€Å"reasonable† given the purchase context. The Framing Effect – buyers are more price sensitive when they perceive the price as a loss rather than a forgone gain, and they have greater price sensitivity when the price is paid separately rather than as part of a bundle.

Drinking Regime Evaluation of Boluses

Drinking Regime Evaluation of Boluses Ondrej Hanu; Daniel Bro, Milan Ã…  imko, Branislav Glik, Miroslav Jurek, Michal Rolinec, Robert Herke Slovak University of Agriculture in Nitra, Slovak Republic Original Paper Drinking regime evaluation with continuous ruminal monitoring boluses The aim of this study was to continuously monitored drinking regime of 7 dairy cows of Holstein breed using boluses during 24 weeks of lactation in relation to the outside temperature and observed daily drinking regime with the impact of drinking on rumen temperature at University Experimental Farm in Oponice. Animals were fed once daily and milked 3 times per day. The bolus pH and temperature values implemented via esophagus were measured every 15 minutes (96 data points per day) with accuracy  ±0.1 ph and  °C. Outside temperature by FREEMETEO meteorological server (48 times per day) was measured. Outside temperature can affect the drinking regime of dairy cows. During lactation weeks with higher outside temperature higher average number of drinking events (ANDE) was determined. The biggest difference between weeks in ANDE 18.33% (p=0.000) was found. Daily ANDE 9.25 ±1.85 and average daily temperature (ADT) 19.03 ±5.19  °C were observed. The most of the drinking events (ND E) concentrated to 4 main peaks (25.17%) during working hours (74.98%) was found. After the feed intake and milking the highest frequencies of NDE were observed. The highest average ruminal temperature after drinking (ARTAD) during night before first feeding due to lower NDE in this time were found. Overall ARTAD 36.86  °C was observed. The most measured ruminal temperatures after drinking (RTAD) (51.53%) in the interval 35 37  °C were found. This research proved that continuous ruminal monitoring with boluses is an appropriate tool for drinking regime evaluation and heat stress determination in herd of dairy cows. Keywords: bolus, rumen, temperature, water intake, outside temperature Water supplies for both humans and livestock are becoming a subject of increasing importance. Indeed, climate change and drinking water deficits in certain areas have meant that supplies of clean water for livestock are becoming problematic, at least during certain periods of the year. Water is considered the most important nutrient for health and performance in dairy herds. Loss of water from the body occurs through milk production, urine and fecal excretion, sweat and vapour loss from lungs (NRC, 2001). A adequate water intake is essential to avoid negative effects on animal health, performance and welfare (Murphy,1992; Meyer et al., 2004), and 25 and 50% restriction of drinking water relative to ad libitum intake decreased feed intake and milk yield in dairy cows (Steiger Burgos et al., 2001). Results of several experiments showed that an average of 83% of the water demand is met by drinking (NRC, 2001). Many studies found the association between water intake and outside temperatu re and between water intake and the number of drinking events (Matarazzo et al., 2003; Brown-Brandl et al., 2006; Arias et al., 2008). Drinking activity can be monitored continuously and simultaneously for randomly enrolled cows using a data acquisition system based on an individual radio frequency identification collar (Cardot et al., 2008) or with observers (Jago et al., 2005). Huzzey et al. (2005) monitored drinking activity of dairy cows using video cameras connected to a video multiplexer and a time-lapse videocassette recorder. Bewley et al. (2008) monitored ruminal temperature using boluses permanently residing in the cows reticulum and indentified temperatures influenced by drinking events. The aim of this study was to monitored drinking regime of dairy cows using boluses during lactation in relation to the outside temperature, daily drinking regime and the impact of drinking on rumen temperature. 2.1 Animals and housing Measured data from 7 dairy cows of Holstein breed (average age 3.57) in cooperation with the University Experimental Farm in Oponice during 24 lactation weeks were collected. Selected cows had average milk production 10 175 kg per lactation with 3.94% of fats, 3.10% of crude proteins and 4.70% of lactose. Experimental cows were housed in the groups with another dairy cows together. 2.2 Feeding and water availability Animals were fed once daily with Total Mix Ratio (Table 1) ad libitum between 4:00 and 5:00 and milked 3 times per day at 6:00, 12:00 and 18:00. Corn silage (pH 3.85) and alfalfa silage acidity (pH 4.85) with Sodium Bicarbonate (550 g.head-1) and Magnesium Oxide (51 g.head-1) were neutralised. In one section for 20 dairy cows two drinkers were available. Table 1 Total Mix Ratio composition DM (kg) NEL (MJ.kg-1) CP (%) NDF (%) Starch (%) 25.45 153.86 15.74 24.35 25.39 abbreviations: DM dry mater, NEL netto energy of lactation, CP crude protein, NDF neutral detergent fiber 2.3 Data measuring and data collecting Every dairy cow had implemented farm bolus for continual data measuring which was implemented through esophagus orally with the use of special balling gun. The bolus pH and temperature values were measured every 15 minutes (96 data points per day) with accuracy  ±0.1. Outside temperature by FREEMETEO meteorological server (48 times per day) was measured. Used boluses (eCow Devon, Ltd., Great Britain) are characteristic with its small dimensions (135 27 mm) and weight 207 g. Data with the handset with antenna and dongle connected with USB dongle connector with the radio frequency 434 MHz in the milking parlour were downloaded. Collected data were summarized with HathorHBClient v. 1.8.1. 2.4 Statistical evaluation Statistical evaluation with IBM SPSS v. 20.0 was realised. Descriptive statistics with One-way ANOVA were recalculated. Statistically differences between average daily outside temperatures (ADT), average ruminal temperatures after drinking (ARTAD) and average numbers of drinking events (ANDE) with post hoc Tukey Test were determined. Effect of outside temperature on number of drinking events with Pearson correlation coefficient (r) was realised. As drinking event a decrease in ruminal temperature less than -0.70% and ruminal pH less than 0.00% with previous data point using data filter was selected. Drinking regime of dairy cows during lactation with average temperatures during drinking events in the Figure 1 are shown. ANDE during monitored period 9.25 ±1.85 and ADT 19.03 ±5.19 were observed. Minimal reported ANDE found Jago et al. (2005) 5.2. Higher average ANDE for monitored period observed Huzzey et al. (2005) 9.5 ±0.4 and Perera et al. (1986) 9.4. Cardot et al. (2008) determined ANDE 7.3 ±2.8 during their experiment. The effect of ADT r=0.132 on ANDE was determined (p=0.001) but in 19 cases the same change both increase or decrase in the comparison with previous week between ANDE and ADT was found. Gonzà ¡lez Pereyra et al. (2010) found effect of outside temperature on ANDE r=0.507 (p

Document Quality :: GCSE Chemistry Coursework Investigation

Document Quality Measuring the rate of reaction, when dilute sodium thiosulphate solution and dilute hydrochloric acid are mixed. Hypothesis: I predict that the higher the concentration of sodium thiosulphate, the faster the rate of reaction. Aim: In this experiment I intend to test the collision theory. My aim is to see if the concentration of sodium thiosulphate will affect the rate of reaction. Introduction: In this experiment I will vary the concentration of sodium thiosulphate to measure the rates of reaction. I will be mixing different concentrations of sodium thiosulphate with hydrochloric acid, the collision theory says the reaction time will alter; this is what I will be testing. The collision theory tells us that the larger the surface area, the faster the reaction. So the higher the concentration the more atoms there are to react. There are 4 things that affect the rate of reaction, concentration, surface area, catalysts and temperature. Concentration can affect the rate of reaction by increasing atoms to collide with each other. The more atoms there are to collide, the faster the rate of reaction. In reactions where gases are involved, if you increase the pressure the particles will move closer together. The smaller the space in the container, collisions are more likely to occur. If the concentration is weaker, this means there are fewer atoms to collide. If an object has a large surface area, the reaction rate will increase as there is more surface area for the atoms to collide. I hypothesis that the more surface area there is the more space there is for the particles to react. Catalysts change the rate of chemical reactions but are not used up in the reaction. Examples of catalysts are enzymes, clay, and hydrogen peroxide. These all speed up certain chemical reactions. Enzymes are found in the human body, they are there to break down food and make digestion time shorter. Enzymes can also be found in washing powder, to break down food stains on clothes. Temperature can affect the rate of reaction to a great extent because particles vibrate more at higher temperatures. The more they vibrate the more chance there is that they will collide with another particle, thus causing the rate of reaction to increase. In a chemical reaction, the reactants collide with each other. Pressure This diagram shows us that the more pressure there is the more likely it is that the particles will collide. High pressure Low pressure More collisions as the particles are closer together Not many collisions Marble in dilute hydrochloric acid This diagram shows us that surface area does have an effect on the rate of reaction. 1 Large marble cube Marble cube split into 6 pieces In the experiment I carry out, I will change the concentration and see

Politics of North and South Korea Essay -- essays research papers fc

Research Essay: North Korea and South Korea Throughout the history of politics, our societies have encountered a large variety of different political and governing systems. From systems in which idealists introduced to our world, believing that they are capable of letting the world function and operate in a more efficient manner came two of the most popular political ideologies that most would recognize. They are known as democracy and communism. Even now during the twenty-first century, issues relating to the struggle between these two beliefs are still rising in different regions of the world where people are demanding more freedom. Knowing that both democracy and communism are pretty much the total opposite extremes of the other, often we hear events in which democratic countries such as the United States attempting to spread their political principles into other non-democratic areas. An interesting place to look at would be North Korea and South Korea, a place under the same name but ruled in totally opposite fashion as th e North seems to valued control, while the South seems to valued freedom. Although people nowadays always encourage and promote individual rights and freedom, does democracy really allow a more efficient governing process? Or are the ways of communist still holding certain advantages over the idea of individualism? Perhaps a more in-depth look into the difference in North and South Korea ¡Ã‚ ¦s political system would bring answers to this question.   Ã‚  Ã‚  Ã‚  Ã‚  In a certain Point of view, Korea has 2 distinctive Political cultures and values. Starting off with South Korea, or the  ¡Ã‚ §Republic of Korea ¡Ã‚ ¨, the political culture of South Korea is a mix of native, Chinese and Western elements. These elements includes things such as the  ¡Ã‚ §belief that human society was an integral part of the whole universe interrelated with it in maintaining order and harmony ¡Ã‚ ¨,  ¡Ã‚ §acceptance of harmony, order, and consensus as major political values and purposes. ¡Ã‚ ¨,  ¡Ã‚ §preference for decision-making by consensus, rather than by majority vote or force of arms; yet at the same time, unwillingness to compromise on matters perceived to involve principle ¡Ã‚ ¨,  ¡Ã‚ §emphasis on form and procedure, as well as substantive performance, as key elements in maintaining order ¡Ã‚ ¨, and a lot more1. In a certain points of view, South Korea ¡Ã‚ ¦s values are opposite to man... ...created and designed by Oldrich Kyn.. 2002. . 17)  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚ ¡Ã‚ §South and North Korea. ¡Ã‚ ¨ ECONOMIC COUNTRY COMPARISONS , Site created and designed by Oldrich Kyn.. 2002. . 18)  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚ ¡Ã‚ §South and North Korea. ¡Ã‚ ¨ ECONOMIC COUNTRY COMPARISONS , Site created and designed by Oldrich Kyn.. 2002. . Bibliography 1.  Ã‚  Ã‚  Ã‚  Ã‚  Robert E. Bedeski. The Transformation of South Korea: Reform and reconstitution in the Sixth Republic Under Roh Tae Woo, 1987-1992. New York: Routledge, 1994. 2.  Ã‚  Ã‚  Ã‚  Ã‚  John Kie-Chiagn Oh. Korea: Democracy on Trial. London: Cornell University Press, 1968. 3.  Ã‚  Ã‚  Ã‚  Ã‚  Park Chung Hee. Our Nation ¡Ã‚ ¦s Path: Ideology of Social Reconstruction. West Gate: Dong-a Publishing Company, Ltd., 1966. 4.  Ã‚  Ã‚  Ã‚  Ã‚  Ilpyong J. Jim. Communist Politics In North Korea. New York: Praeger Publishers, 1975. 5.  Ã‚  Ã‚  Ã‚  Ã‚  Donald Stone Macdonald. The Koreans: Contemporary Politics and Society. Boulder & London: Westview Press, 1988. 6.  Ã‚  Ã‚  Ã‚  Ã‚  Oldrich Kyn.  ¡Ã‚ §South and North Korea. ¡Ã‚ ¨ ECONOMIC COUNTRY COMPARISONS. 2002.

Recent Changes in Monetary Policy in Pakistan

{text:bookmark} {text:toc-mark-start} PAKISTAN ECONOMIC POLICY {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} DATED: *15TH* DECEMBER 2009 {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Submitted To: {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Sir Ashraf Janjua {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Submitted By: {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Nimra Anjum {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Rakana Payam {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} text:bookmark} {text:toc-mark-start} *Sheema H*asanat {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} ACKNOWLEDGEMENT {text:toc-mark-end} We would like to give our special thanks to our Pakistan Economic Policy teacher, Mr. Ashraf Janjua for giving us this opportunity to work and have an insight of the our country’s economy, also to let us interpret our learning in a real situation. We thank him for the assist ance through out this project. Table of Contents MONETARY POLICY Monetary policy is the regulation of volume of money supply, by the central bank in order to achieve relative price stability. If the economy is heating up then the Central bank can increase the bank rate or the reserve requirement. Whereas when there is recession, then the bank rate is reduced. Instruments for the Regulation of Money Supply Open market operations. Cash Reserve requirement Statutory Liquidity Ratio Credit Ceiling Open market operations: It is the buying and selling of government securities. If the M. S is high then the securities are sold so that people buy it and money goes to the SBP and if the M. S is low then you buy securities in this way Money supply increases. Cash Reserve Requirement: It is a requirement in which all the commercial bank have to keep a percentage of cash with the SBP. Currently, it is around 7%. Statutory Liquidity Ratio: It is a requirement in which each bank has to maintain a certain reserve requirement to strengthen their liquidity position. Credit Ceiling: It is the fixation of the upper limit; quotas are assigned to different banks. Components of Money text:bookmark} {text:toc-mark-start} Mo is the resource money and comprises of: {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Currency in circulation {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Bank’s Reserve with the SBP {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Other deposits with the SBP {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Cash in the tills of the Bank {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} M1= Currency in circulation + Demand deposits with scheduled banks + other deposits with SBP. text:toc-mark-end} {text:bookmark} {text:toc-mark-start} M2=M1 + time deposits with the scheduled banks. Technically, M2 is called Monetary Assets & M1 is called Money Supply. {text:toc-mark-end} How is Money Created? {text:bookmark} {text:toc-mark-start} There are three sources of creating money: {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Net Credit creation by the central Bank (SBP): Credit extended during a period minus recoveries. {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} 1 and 2 are called net Bank credit. Credit is always on the Asset side of Banks. When this credit is used by issuing cheques end up with bank (either the same bank/or any other bank). These cheques are deposits, and are on the liability side of the banks. These deposits/liabilities become money/monetary Assets, and are equal to the credit created by the Banking System. {text:toc-mark-end} How Much Money can be Created? {text:bookmark} {text:toc-mark-start} The share of currency in circulation in Mo and, {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Level of cash in tills and commercial banks reserves with SBP as a % of Mo. text:toc-mark-end} {text:bookmark} {text:toc-mark-start} The higher the value of either of these amounts with respect to M2, the lower the Money Multiplier. {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} 1/c + r (1-c) {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} C= the ratio b/w CIC + other deposits with SBP and M2 {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} R= Cash assets of Scheduled banks: Ca sh in tills of commercial banks + reserves with SBP. {text:toc-mark-end} DOES MONETARY POLICY PLAY EFFECTIVE ROLE IN CONTROLLING INFLATION IN PAKISTAN? Introduction text:bookmark} {text:toc-mark-start} Inflation is politically costly for the government (Haque and {text:toc-mark-end} Salient Features of the Monetary Policy {draw:frame} {draw:frame} {draw:frame} Instruments of Monetary Policy {text:bookmark} {text:toc-mark-start} Cash Reserve Requirement {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} {draw:frame} {text:toc-mark-end} {text:bookmark} {text:toc-mark-start} Discount Rate {text:toc-mark-end} {draw:frame} INFLATION TREND IN PAKISTAN (2004-2009) According to the State Bank of Pakistan, the core inflation in the year (2005) was 8. per cent which has almost doubled since the last year (2004) in which the inflation rate was 3. 8 per cent. During this year the non-governmental borrowing increased by 30 per cent. The two main reasons for high inflation during this peri od were because of excessive government borrowings and the price of wheat. According to the State Bank of Pakistan, government estimated that the inflation rate in the next year would range between 7. 7 and 8. 3 per cent. During the year (2006) there was a decrease in the total inflation of the country (general and food) from 9. 3 to 7. 9 per cent and 12. 5 per cent to 6. per cent respectively. The government took several major steps to bring the inflation down during this year as well by tightening the monetary policy and augmenting the supply of essential commodities through liberalization of import regime. As a result the general inflation declined from 9. 3 per cent (2004-05) to 7. 9 per cent (2005-06) & the non-governmental borrowing in the year 2006 became 23 per cent. During 2007 the core inflation reduced from 7. 5 per cent to 5. 9 per cent, due to tight monetary policy. According to the SBP the food inflation increased from 6. 9 per cent (2006) to 10. per cent (2007) becaus e of supply side constraints in which the prices of some key food staples (including wheat, rice, vegetable, ghee etc,) were increased. Where as comparatively the non-food prices grew at a slower pace since last year and the general Inflation (CPI) declined from 7. 9 per cent to 7. 8 per cent. The inflationary trend in the food prices during the year (2008) increased to 17. 6 per cent as compared to the last year in which the food inflation was 10. 3 per cent, affecting people living standards of low and fixed income groups. The non-food inflation had the same increasing trend as in the year (2007), which was 6. per cent and during the year (2008) was 7. 9 per cent. Although the core inflation was reduced to 5. 9 per cent but during this year it went back to 8. 4 per cent because of the global increase in some commodity, higher utility tariff and by local supply and demand driven prices. Inflation during (2008) indicates that the prices of a few commodities (18) essential food items registered sharp increase particularly during the second half of the fiscal year (2008). Other significant contributors to (2008) upward inflationary trend included house rent, which is the index that measures the cost of construction in Pakistan, racing to 11. per cent by April (2008). The current fiscal year commenced with ease in headlines compared to the same month of previous fiscal year. The consumer price inflation annually was 11. 2 per cent during July (2009) as against 24. 3 per cent in July (2008) and 13. 1 per cent in the previous month. A major increase in the core inflation was witnessed in July (2009) of 17. 6 per cent as compared to July (2008) 8. 4 per cent. The food inflation increased by 6. 1 per cent during this fiscal year. The main reason for this high inflation was due to low export growth relative to import, high oil prices and inadequate foreign apital inflow. Conclusively, one can say that inflation adversely affects the overall economic growth, the financ ial sector development and exploit the vulnerable poor segments of the population. Inflation also decreases the real income and induces uncertainty. Considering such undesirable impacts of inflation on the economy, there's a consensus among the world leading central banks that the price stability is going to be the prime objective of monetary policy and the central banks are committed to lower the inflation in the economy. Hence the State bank of Pakistan should adopt inflation as their main focus of monetary policy, by targeting inflation explicitly or implicitly as and when required. EFFECTIVENESS OF MONETARY POLICY STATEMENT IN PAKISTAN Economic policies aim to increase the welfare of the general public and monetary policy supports this broad objective by focusing its efforts to promote price stability. Embedded in this objective is the belief that persistent inflation would compromise the long term economic prospects of the country. The objective of monetary policy in Pakistan, as laid down in the SBP Act of 1956, is to achieve the targets of inflation and growth set annually by the government. In pursuit of this mandate, SBP formulates the country's monetary policy that is consistent with these announced targets. In my remarks today, I plan to provide perspective on: First, why central banks focus on price stability? Second, how the monetary policy transmission mechanisms work? Third, what are the principal features of Pakistan's monetary policy framework? Fourth, selected thoughts on effectiveness of Pakistan's monetary policy framework Finally, what measures are needed to improve the effectiveness of the monetary policy framework in Pakistan? These questions have been a subject of much debate lately, as monetary tightening – an inevitable policy response for regaining macroeconomic stability – has aroused anxiety but better public understanding of this question will help them to appreciate central bank's monetary policy stance. Why Focus on Price Stability? Monetary Policy Transmission Mechanism The monetary transmission mechanism refers to a process through which monetary policy decisions affect the level of economic activity in the economy and the inflation rate. Understanding the transmission mechanism of monetary policy is crucial for appropriate design and efficient conduct of monetary policy. As monetary policy actions affect policy variables with a considerable lag and with high degree of variability and uncertainty, it is important to predict the possible impact and extent of monetary policy actions on the real variables. Thus, by its very nature, monetary policy tends to be forward-looking. It is also important to know which transmission channels are more effective in terms of transmitting changes in monetary policy actions to ultimate policy goals. Since various financial sector developments particularly regarding introduction of new financial products, technological changes, institutional strengthening, and expectations about future policy, etc can potentially change economic effects of the monetary policy measures, there is a need to regularly update, empirically test and reinterpret monetary policy transmission channels. The impact of monetary policy is perceived to transmit in to the real economic activity through five channels. †¢ The first channel and most widely studied and understood channel of monetary policy transmission relies on the link between changes in the short-term nominal interest rate (induced by changes in the policy rate) and the long-term real interest rate that ultimately affect components of aggregate demand such as consumption and investment in an economy. As such, it is the changes in the long-term real interest rates that have its impact on aggregate consumption, business investment and other components of aggregate demand. †¢ The second channel, known as the credit channel, involves changes in monetary policy that not only affects the ability of firms to borrow money (by affecting their net worth) but also affects the ability of banks to lend money. The strength of this channel depends on the degree to which the central bank has allowed banks to extend loans and the dependence of borrowers on bank loans. These factors are clearly influenced by the structure of the financial system and its regulation. †¢ The third channel of monetary policy transmission focuses on asset prices (other than the interest rate) such as the market value of securities (bonds and equities) and prices of real estate. A policy-induced change in the nominal interest rate affects the price of bonds and stocks that may change the market value of firms relative to the replacement cost of capital, affecting investment. Moreover, a change in the prices of securities entails a change in wealth which can affect the consumption of households. Fourth, a policy-induced change in the domestic interest rate also affects the exchange rate that in turn affects the foreign financial flows, net exports and thus aggregate demand. The strength of the exchange rate channel depends on the responsiveness of the exchange rate to monetary shocks, the degree of openness of the economy, sensitivity of foreign private inflows and n et exports to exchange rate variations, and the net worth of firms and thus their borrowing capacity if they have taken exposure to foreign currency. Moreover, exchange rate changes lead to changes in the domestic price of imported consumption goods and imported production inputs affecting inflation directly. †¢ Since expectations influence the inflation dynamics, there is a fifth channel that is based on the economic agents' expectations of the future prospects of the economy and likely stance of the monetary policy. According to this ‘expectations channel', most economic variables are determined in a forward-looking manner and are affected by the expected onetary policy actions. Thus, a consistent, credible, and transparent monetary policy can potentially affect the likely path of the economy by simply affecting expectations. Monetary Policy Framework in Pakistan Considering the economic and financial market structure in Pakistan, SBP has for sometime pursued a monetary targeting regime with broad money supply (M2) as a nominal anchor to achieve the objective of controlling inflation without any prejudice to growth. The process of monetary policy formulation usually begins at the start of the fiscal year when SBP sets a target of M2 growth in line with government's targets of inflation and growth (usually in the month of May) and an estimation of money demand in the economy. The basic idea is to keep the money supply close to its estimated demand level, as both a significant excess and a shortfall may lead to considerable deviations in actual outcomes of inflation and real GDP growth from their respective targets. Underlying this framework are two strong assumptions: first, there is a strong and reliable relationship between the goal variable (inflation or real GDP) and M2; and second, the SBP can control growth in M2. While containing the M2 growth close to its target level is the key consideration in the current monetary framework, the composition of the money supply does matter and at times requires policy actions even if these actions lead to a deviation in monetary growth from its target level. To understand this point, it is necessary to know the major components of money supply and their relative importance. Net foreign Assets (NFA) and Net Domestic Assets (NDA) of the banking system are the two major components of money supply. The NFA is the excess of foreign exchange inflows over outflows to the banking system, or in other terms it is a reflection of underlying trends in the country's external Balance of Payment (BoP) position. It is estimated by the projected values of all major external transactions such trade, workers' remittances; debt servicing, foreign investment, and debt flows etc. The NDA of the banking system, which primarily consists of credit to the government and the private sector, reflects changes in the fiscal and the real sectors of the economy, If is estimated as a residual of M2 and the NFA. Further break-up of NDA is estimated on the basis of projected credit needs of the government and the private sector. NOW coming to the importance of these components of the money supply, depletion in NFA is generally considered as an unhealthy development. Sharp NFA depletion reflects worsening BOP position and a pressure on exchange rate. In such a case, a higher NDA growth, though helps in expanding M2 to reach ifs target level, may further deteriorate external accounts, sharper depreciation of local currency, and higher depletion of country's foreign exchange reserves. Although since FY07, only the indicative M2 growth target is being announced, SBP also takes into consideration the causative factors for monetary expansion while pursing this target. Considering the changes in monetary aggregates and other economic variables, the changes in monetary policy are signaled through adjustments in the policy discount rate (3-day repo rate). Further, the changes in the policy rate are complemented by appropriate liquidity management mainly through Open Market Operations (OMOs) and if required changes in the Cash Reserve Requirement (CRR) and Statutory Liquid Reserve requirement (SLR) are also made. † Significance of various channels that transmit the monetary policy shocks in Pakistan to the real economy has been analyzed by few economists. Ahmad et al. (2005) found that credit channel is the most ‘important conduit for transmitting monetary policy actions to the real economic activity. Evidence confirms transmission through the active asset price channel and exchange rate channel. According to this study, monetary policy shocks impact real output after a lag of 7 to 11 months. Tasneem and Waheed (2006), on the other hand, investigated whether different sectors of the economy respond differently to monetary shocks. The presence of sector wise differences in the monetary transmission mechanism has profound implications for macroeconomic management as the central bank then has to weigh the varying consequences of its actions on different sectors. Investigating the transmission of changes in interest rate to seven sub sectors of the economy, the authors found evidence supporting sector-specific variation in the real effects of monetary policy. They found that the interest rate shock on manufacturing, wholesale and retail trade, and finance and insurance sectors transmit after a lag of 6 to 12 months. On the other hand, monetary policy shocks have negligible impact on agriculture, mining and quarrying, construction and ownership of dwelling sectors. Generally, historical evidence does reflect that Pakistan has been a high inflation and high interest economy given its inherent structural weaknesses. The role and effectiveness of monetary policy appears more visible in the 2000s when financial sector reforms started bearing fruits in terms of a more market based money and foreign exchange markets. Entering the 21sf century, the loose monetary policy stance in the face of low inflation, low growth and low twin deficits, along with structural measures to open up the economy and alleviate some first round constraints, triggered the economy on a long-term growth trajectory of above 7 percent. Monetary policy stance was however altered as the inflationary pressures started to build up in 2005. At the end of the fiscal year, the economy, which had been showing sustained steady growth since FY01, registered a historically high level of growth (9 percent), average inflation rose sharply (9. percent) and the external current account balance turned into deficit (-1. 4 percent of GDP) Coinciding with these developments, the fiscal module started to show signs of stress as the fiscal balance was converted into a deficit and the stock of external debt and liabilities, which had been declining since FY00 after the Paris Club rescheduling, began increasing. These indicators largely capture t he high and growing aggregate demand in the economy on account of sustained increase in peoples' income. With the emerging domestic and global price pressures, SBP tightened its monetary policy after a prolonged gap of a few years. The efforts to rein-in inflation, however, proved less effective due to a rebound in international commodity prices and a rise in domestic food prices later on. The rise in the international commodity prices, particularly oil, exacerbated the fight against inflation. The international oil prices (Arabian Light) rose from US$27. 1 at end 2004 to US$50. 9 at end 2006, whereas international food prices rose by 24, 24 and 21 percent during 2004, 2005 and 2006 respectively. Realizing the complications of monetary management and adverse global and domestic economic developments, the implementation of SBP monetary policy during FY06 varied significantly from the preceding fiscal years. In addition to the rise in the policy rate, the central bank focused on the short-end of the yield curve, draining excess liquidity from the interbank money market and pushing up short-tenor rates. Consequently, not only did the overnight rates remain close to the discount rate through most of the year, the volatility in these rates also declined. These tight monetary conditions along with the Government's administrative measures to control food inflation helped in scaling down average inflation from 9. 3 percent in FY05 to 7. 9 percent in FY06, within the 8. 0 percent annual target. This was certainly an encouraging development, particularly as if was achieved without affecting economic growth as the real GDP growth remained strong at 6. 6 percent in FY06. Further Strengthening of Tight Monetary Policy For FY07, the government set an inflation target of 6. 5 percent. To achieve this, a further moderation in aggregate demand during FY07 was required as the core inflation witnessed a relatively smaller decline in FY06, indicating that demand-side inflationary pressures were strong. In this perspective, SBP further tightened its monetary policy in July 2006 raising the CRR and SLR for the scheduled banks; and its policy rate by 50 basis points (bps) to 9. 5 percent. Moreover, proactive liquidity management helped in transmitting the monetary tightening signals to key interest rates in the economy. For instance, the Karachi Inter Bank Offer Rate (KIBOR) of 6 months tenor increased from 9. 6 percent in June 2006 to 10. 02 percent at end-June 2007 and the banks' weighted average lending and deposits rates (on outstanding amount) increased by 0. 93 percentage points and 1. 1 percentage points, respectively, during FY07. In retrospect, it appears evident that monetary tightening in FY07 did not put any adverse impact on economic growth, as not only was the real GDP growth target of 7. 0 percent for FY07 was met, the growth was quite broad based. At the same time, the impact of the monetary tightening was most evident in the continued deceleration in core inflation during FY07. One measure of core inflation, the non-food non-energy CPI, continued its downtrend from YoY high of 7. 8 percent in October 2005, to 6. 3 percent at end-FY06, and to 5. 1 percent by the end of FY07. However, much of the gains from the tight monetary policy on overall CPI inflation were offset by the unexpected rise in food inflation. On the downside, however, broad money supply (M2) grew by 19. 3 percent during FY07, exceeding the annual target by 5. percentage points. Slippages in money supply growth largely stemmed from an expansion in NFA due to the higher than expected foreign exchange inflows. Equally stressful was the impact of Government borrowings from the central bank during the course of the year. The pressure from the fiscal account was due to mismatch in its external budgetary inflows and expenditures. With the privatization inflows and th e receipts from a sovereign debt offering at end-FY07, the Government managed to end the year with retirement of central bank borrowings, on the margin. By end-FYO7, SBP holdings of government papers were still around Rs 452 billion, despite a net retirement of Rs 56. 0 billion during the year. Another major aberration in FY07 emanated from the high level of SBP refinancing extended, for both working capital and long-term investment, to exporters. Aside from monetary management complexities, these schemes have been distorting the incentive structure in the economy. FY08 and Beginning of FY09: More Challenging FY08 was an exceptionally difficult year. The domestic macroeconomic and political vulnerabilities coupled with a very challenging global environment caused slippages in macroeconomic targets by a wide margin. After a relatively long period of macroeconomic stability and prosperity, the global economy faced multifarious challenges: (i) hit by the sub prime mortgage crisis in U. S in 2007, the international financial markets had been in turmoil, the impact of which was felt across markets and continents; (ii) rising global commodity prices, with crude oil and food staples prices skyrocketing; and (iii) a gradual slide in the U. S dollar against major currencies. Combination of these events induced a degree of recessionary tendencies and inflationary pressures across developed and developing countries. Policy-makers were gripped with the dual challenge of slowdown in growth and unprecedented rising inflationary pressures. Central bankers faced a demanding task of weighing the trade-off between growth and price stability. With the exception of few developed countries, most central banks showed a strong bias towards addressing the risk of inflation and responded with tightening of monetary policies. On the domestic front, the external current account deficit and fiscal deficit widened considerably to unsustainable level (8. 4 and 7. 4 percent of GDP). The subsidy payments worth Rs 407 billion by Government, which account for almost half of the fiscal deficit, shielded domestic consumers from high international POL and commodity prices and distorted the natural demand adjustment mechanism. While the government passed on price increase to consumers, the rising international oil and other importable prices continued to take a toll on the economy. Rising demand has cost the country dearly in terms of foreign exchange spent on importing large volumes of these commodities. Rising fiscal deficit and lower than required financing flows resulted in exceptional recourse of the Government to the highly inflationary central bank borrowing for financing deficit. At the same time the surge in imports persisted. As a result, inflation accelerated and its expectations strengthened due to pass through of international oil prices to the domestic market, increases in the electricity tariff and the general sales tax, and rising exchange rate depreciation. These developments resulted in a further rise in headline as well as core inflation (20 percent weighted trimmed measure) to 25 percent and 21. 7 percent respectively in October 2008. Considering the size of macroeconomic imbalances and the emerging inflationary pressures, SBP remained committed to achieve price stability over the medium term and thus had to launch steeper monetary tightening to tame the demand pressures and restore macroeconomic stability in FY09. SBP thus increased the policy rate from 13. 5 to 15%. What Needs to be Done to Improve the Effectiveness of Monetary Policy? Apart from taking policy measures to address the emerging challenges, SBP also introduced structural changes in the process of monetary policy formulation and conduct to make the monetary policy formulation and implementation more transparent, efficient, and effective. Specifically, during the last couple of years, SBP focused on †¢ Institutionalizing the process of policy formulation and conduct †¢ Stepping up movement towards a more market based credit allocation mechanism Developing its analytical and operational capacity †¢ Improving its capabilities to assess future developments to act proactively and †¢ Improving upon the communication of policy stance to the general public. However, the following areas need attention and are keys or effective monetary management. 1. Effectiveness of monetary and fiscal co-ordination would be helpful. Section 9A and 9B of the SBP Act (amended in 1994) art iculates the institutional mechanism for economic policy making and co-ordination and defines the ground rules for both the process and the policy making. However, the track record of the Monetary and Fiscal Policies Co-ordination Board (MFPCB), established in February 1994 that requires quarterly meetings of the SBP and the government, has been less than satisfactory. Furthermore, the sequencing of economy-wide projections is done in isolation of the budget and monetary policy making process, and the budget making process has not respected the monetary compulsions. With rising spending and stagnating revenues, the budget assumes at the start of the year certain recourse to the central bank rather than treat it as mere ways and means advances. . For effective analysis of developments and policy making, timely and quality information is extremely important. However, due to weaknesses in the data collection and reporting mechanism of the various agencies of the country, information is not available with desired frequency and timeliness. Also there are concerns over the quality of data. Unlike many developed and developing countries, data on quarterly GDP, employment and wages, etc is not available in case of Pakistan. Moreover, the data on key macroeconomic variables (such as government expenditure and revenue, output of large-scale manufacturing, crop estimates, etc) is usually available with substantial lags. This constrains an in-depth analysis of the current economic situation and evolving trends, and hinders the ability of the SBP to develop a forward-looking policy stance. 3. Unlike many countries, both developed and developing, there is no prescribed limit on government borrowing from SBP defined in the SBP Act or the Fiscal Responsibility and Debt Limitation (FRDL) Act 2005. Besides being highly inflationary, government borrowing from SBP also complicates liquidity management. Borrowing from the central bank injects liquidity in the system through increased currency in circulation and deposits of the government with the banks. In both cases, the impact of tight monetary stance is diluted as this automatic creation of money increases money supply without any prior notice. Moreover, access to potentially unlimited borrowings from the SBP provides little incentives to the government to put the fiscal accounts in order. Therefore, the foremost task to improve the effectiveness of monetary policy is to prohibit the practice of government borrowings from the SBP. In this regard, appropriate provisions are required to cease or limit government recourse to central bank financing through amendments in the SBP Act and the FRDL Act 2005. 4. Another issue is to make a clear distinction between exchange rate management and monetary management. Currently, there is a general perception that the State Bank is bound to keep the exchange rate at some predefined level and any movement away from this level is then considered as an inefficiency of the SBP. There is a need to understand that for an open economy, it is impossible to pursue an independent monetary and exchange rate policy as well as allowing capital to move freely across the border. Since the SBP endeavors to achieve price stability through achieving monetary targets by changes in the policy rate, it is not possible to maintain exchange rates at some level with free capital mobility. This can only be achieved by putting complete restrictions on capital movements, which is not possible. SBP's responsibility is to ensure an environment where foreign exchange flows are driven by economic fundamental and are not misguided by rent seeking speculation. 5. Finally, based on experience particularly gained during the last two months is to differentiate between liquidity management and monetary policy stance. Recently, when the banking system experienced extraordinary stress due to shallow liquidity in the system, rumor mongering heightened the general public anxiety over few banks' sustainability. Consequently, the SBP had to intervene in the market by injecting ample liquidity through various measures. In some quarters, these changes were deemed as a change in the bank's tight monetary policy stance. However, this was not the case and the bank had to clearly and repeatedly communicate that the existing stance is being continued. Later on, the bank further tightened its monetary policy. It must be understood that quite often, liquidity management can drive the market interest rates away from the direction desired under the monetary policy stance. However, this has to be temporary and ‘the interest rates are bound to move in the policy stance direction. To resolve this issue, the SBP is studying various options, including the introduction of a â€Å"Standing Deposit Facility† to keep the interbank rate within a corridor. In conclusion, it is imperative that above steps be taken urgently. Over the period, however, this needs to be complemented with much deeper structural reforms to synchronize and reform the medium term planning for the budget and monetary policy formulation process Several studies and technical assistance have provided extensive guidance in this area, but the lack of capacities and short term compulsions have often withheld such reforms. What is important is to recognize that a medium term development strategy, independently worked out, would help minimize one agency interest which has often been a source of co-ordination difficulties. It would also help the budget making process more rule based than the incrementally driven process to satisfy conflicting demands. THE RECENT DEVELOPMENTS IN MONETARY POLICY (2007-2009) The SBP has kept its tight monetary policy stance in the period July 01, 2008-April 20, 2009. The policy rate was adjusted upward in November 2008 to shave-off some aggregate demand from the economy and kept constant in January 2009. However, noticing visible signs of demand compression enabled the SBP to reduce 100 basis points on April 20, 2009. During July 01, 2008-April 18, 2009, money supply (M2) expanded by 1. 6 percent against the target of expansion of 8. 0 percent for the year and last year expansion of 8. 1 percent in the comparable period of last year. The reserve money witnessed contraction of 2. 2 percent in this period as against expansion of 10. 3 percent in the comparable period of last year. Net domestic assets (NDA) have increased by Rs. 307 billion as compared to increase of Rs. 627. 5billion in last year. However, it is showing an increase of 7. 6 percent in stock during this period, whereas, last year the growth in stock was 20. 4 percent in the comparable period. Net foreign assets (NFA) have recorded a contraction of Rs. 263. 9 billion against the contraction of Rs. 356. 4 billion in the comparable of last year [See Table-6]. {draw:frame} Government borrowing for budgetary support has recorded an increase of Rs. 240. 5 billion as compared to Rs. 336. 0 billion in the comparable period of the last year. The government has over performed against freezing the net borrowing from SBP at Rs. 57 billion in 2008-09 and the SBP financing has shown a net increase of Rs. 103. 3 billion and financing from scheduled banks witnessed a net increase of Rs. 137. 2 billion during July 01, 2008-April 18, 2009. Credit to private sector witnessed a net increase of Rs. 55. 4 billion during July 01, 2008-April 18, 2009 as compared to Rs. 359. 7 billion in the comparable period of last year. The stocks st ill went up by 9. 1 percent. SBP undertook aggressive monetary tightening during the period, further increasing the policy rate by 300 bps in two rounds. On a cumulative basis, this means a 550 bps increase during the last 18 months up to March 2009. However, the policy rate was decreased by 100 bps on April 20, 2009. These policy measures were in response to carryover of macroeconomic stresses of the preceding year and increase in real aggregate demand. Monetary tightening has worked in the right direction. Weighted average lending rate have witnessed slight decline from 15. 5 percent in October 2008 to 14. 8 percent in February 2009. Weighted average deposit rate on the other hand has increased from 6. 2 percent in October 2008 to 7. percent in February 2009 which implies narrowing of the spread amidst intensive deposit mobilization efforts on the part of the banks. The weighted average yields on 6 months T-bill has declined by almost 250 basis points to 11. 5 percent in March 2009 as against 14 percent in November and December 2008 [See Fig-2]. {draw:frame} Recent Discount Rate in Pakistan (2007-2009) During 2007-08, the SBP contin ued with tight monetary policy stance, thrice raising the discount rate and increased the Cash Reserve requirement (CRR) and Statutory Liquidity Requirement (SLR). In the light of continued inflationary buildup and increasing pressures in the foreign exchange market, the SBP announced a package of monetary measures on May 21, 2008 that included;(i) an increase of 150 bps in discount rate to 12 percent; (ii) an increase of 100 bps in CRR and SLR to 9 percent and 19 percent, respectively for banking institutions (iii) introduction of a margin requirement for the opening of letter of credit for imports (excluding food and oil) of 35percent, and (iv) establishment of a floor of 5percent on the rate of return on profit and loss sharing and saving accounts. The year 2008-09 is characterized by a reduction in CRR by 2 percent in two equal phases to help the liquidity issues of the banking system. Later on, the SBP announced a 200 bps hike in discount rate to 15 per cent on November 12, 2008 in response to persistent hike in core inflation and current account deficit in a last ditch effort to demand compression. Following a slight reversal in the mounting inflationary and demand pressures, the SBP announced a downward adjustment of policy rate by 100 bps on April 20, 2009. SBP’s tight monetary policy and rationalization of fiscal subsidies and expenditure controls are the key factors that contributed a reasonable progress towards macroeconomic stability. The private consumption grew by 5. 2 percent in real term during 2008-09 which implies that notwithstanding substantial reduction in the fiscal and current account deficits, demand pressures are still confronting monetary management. {draw:frame}