Macroeconomics Essays

Essay Introduction

There are expectations for global macroeconomic development. As there is a global financial crisis that is declining, there are policymakers that can achieve longer issues that are holding back development. In the last decades, there has been an increase in economic crises happening that include negative circumstances. The World Economic Situation Prospects discusses the global financial crisis happening in 2008 through 2009, which was then followed by a debt crisis called the European sovereign.

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Since then, these crises have subsided, and our economy has slowly been increasing since then. The advantage of our economy strengthening is we will be offered a better way of changing policy that includes social dimensions and also environmental that will be good for sustainable development.

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There is an investment control that is improving, but the negative side to this is there are elevated policy uncertainty and increasing levels of debt that will prevent a more global investment issue. These conditions will eventually improve, reduce banking sectors, and recovery in commodity sectors. With that being said, the financial cost will be decreased with the support of rising capital flows that involve cross-border lending and credit growth that is efficient that is focused on developing economies.

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Having improved quality has also helped with production investment in larger economies. When looking at the gross fixed capital formation, it accounted for 60 percent of the rate of change in global activity in 2017. These changes are close to a low point. Because of weak investment growth, a firm and also a rebound investment is needed for the involvement of supporting strong productivity growth and a rate of change progress. There are also uncertain regards to the balance sheet adjustment that is in important central banks. These uncertainties are also in rising debt.

Ideas: Environmental Sustainability and Economic Growth

As a rate change in economic growth goes up, there needs to be an awareness of environmental sustainability. As there is an acceleration that is happening in economic growth, it also comes with an environmental cost. As there are weather shocks that are continuing to increase, there is also a need to build a way to recover quickly from climate change. From this, it helps to control the pace of environmental wearing down. Their carbon emissions seemed to have remained flat between 2013- 2016, and the result of this has resulted in a higher emission level.

As aviation emissions and international shipping have not fallen under the Paris Agreement, these sectors are growing at a fast rate than road transport within the past 25 years. This has also continued to increase since 2013. Because of the air pollution measures happening and are strengthened in international shipping and aviation companies, it is still unsure if current policies will lower emission levels related to the Paris Agreement.

Uncertain Risks and Geopolitical Tensions

There are uncertain risks of future events occurring, which involves changes in trade policy. There is a problem surrounding global conditions and tensions with geopolitical actions. As elevated policy uncertainty continues, it is affecting world trade, aid development, and migration targets. The rise in geopolitical tensions could lead to unilateral and also isolationist policies. Due to global liquidity and low borrowing cost, this has resulted in a rise in global debt measures and an increase in financial imbalances.

Developing economies with open capital markets will be vulnerable because of risk aversion and global liquidity conditions. Because of monetary policy normalization, this could trigger a sort of spike. There are central banks that are in developed economies that are operating in unchartered territory. Lastly, it is less predictable with the change in financial markets. The risk with policy errors then throughout recoveries.

Policy Challenges and Reorienting for Long-Term Growth

Policy challenges are a big problem and reflect the negative shocks of reorienting policy. It is still seen that there are risks and uncertainties remaining. What stands out the most when discussing the economic environment is the positioning of the economic cycle. These cycles are among major economies and control financial market conditions. While there is a focus on policy actions on this crisis, improving investments will create scope in order to reorient policy for long-term issues. This includes being able to strengthen environmental quality related to economic growth. This makes things more inclusive and targets institutional issues that block development.

Finding a way to reorient policy in addressing challenges and making the best use of co-benefits and development objectives can be an outcome of stronger investment, an increase in higher job creation, and economic growth. There are present investments in areas including education, expanding healthcare, a recovery from climate change, and improving and building financial inclusion. This will also cause a change in the progress of environmental goals.

Global Investments and Productivity Growth

Global investments are now marking a significant step in the direction of a broad recovery in global activities and an increase in the long-term world economy. This is sometimes geared up towards productive investment in equipment. The ending result will weigh on the productivity of growth.
As global labor productivity increased in 2018. There is an improvement in the world economy. This has been a pickup in productivity growth. As there is a growth of 1.3 percent, global labor productivity is likely to increase by 1.9 percent.

Developed economies such as Japan, the United States, and Western Europe all have similarities which include productivity growth that has happened over the years. There is productivity growth that is in developed economies that is estimated to have changed from 0.5 percent in the year 2016, now to 1 percent in 2018.

It is still unclear if there will be any improvements in productivity growth that can be continued going forward. It is significant to understand the past of these growth developments. Ever since the global financial crisis that has taken place, it has resulted in slow labor productivity growth in developed economies.

Labor Productivity and its Weaknesses

The many reasons why there is a weakness in labor productivity is because of slow private investments due to the global financial crisis affecting this. Also, the euro area debt crisis plays a part and the fall of commodity prices. The developed stocks have developed in economies and have stayed stagnant, over time depreciating value because of existing capital stock. Investments that are weak have slowed capital deepening. Not only this, but it has a weight on TFP growth. This involves delaying the adoption of capital technologies.

Commodities, International Trade, and Growth Momentum

Commodities and international trade play a part in emerging Asia international trade flows. With world trade rebounding, this is the result of weak trade flows. The following of this is weak trade flows. As global trade flows, there is an amount of expansion post-crisis of growth that is low, which is a growth rate of 2.2 percent. Trade elasticity is calculated by the ratio of growth of global trade, which rose from 0.9 in 2016 to an increased number of 1.2 in 2017. This number still remains low compared to other ratios that were once seen in the years 1990 and the early 2000s. From this, it suggests that there are structural factors taken into account and continue to have an impact on the growth momentum related to global trade.

There is rising tension due to geopolitical and natural disasters that have increased the tension between the Korean Peninsula and the Middle East. The tension between one another is posing global growth. As there are increased incidents of weather-related disasters happening, they are posing a risk during the outlook period of the world economy. Looking at this from a global perspective, escalations between the Democratic Republic of Korea crisis and also tension in the Middle East are of concern to this issue. This problem became worse in 2017. There is a probability that military escalation appears low, but there are also fears that escalation can affect investor sentiment throughout the world and cause financial volatility. The increase in risk aversion related to investors could also have consequences worldwide.

Policy Issues for Sustainable Growth

There are policy issues that are raising sustainable growth. Policymakers have a scope to change the focus of policy towards more long-term growth. As there is growth happening in 2017, a number of situations are holding back quick global progress from social dimensions and sustainable development. Issues are becoming less intense, and this is creating a strong economy that will be able to offer policymakers a better scope to get rid of long-term problems. There are a number of challenges that are happening that are continuing to hold back development which involves governance structure, higher levels of exposure to weather-related disasters, and going through challenges such as security and also political uncertainty. Still, wage growth and higher levels of unemployment are causing a burden across the globe. The quality of economic growth is increasing and is continuing to raise issues of inequality, degradation, and the increase of poverty. As a result and consequence, policymakers should address important key areas, which include: a supportive environment for investment, minimizing inequality, and finding a way to change and improve institutions.

Among these problems, a concern in economic diversification is the development in countries that remain that are at times remaining dependent on some commodities. As commodity exporters deal with busting investment cycles, these cycles pass through conditions such as macroeconomics. Because of this, it is seen by the heavy and increased economic costs that are facing commodity exporters. There are current commodity price realignments that are the result of this.

Sustainable Finance and SDGs

There is a need for sustainable finance that will be able to help with social investments. A financial system is important to have because it is a way of having efficient international flows from developed economies. The lingering risk that could potentially affect global growth will also stop progress toward the SDGs. In addition, there is a need for more resources and a need for mobilizing finance investments that are required for SDG.

Meanwhile, developing countries, as well as emerging economies that have financing needs, should find ways to prepare for low capital flows, liquidity that has secure conditions, and a tighter monetary policy space. Big emerging economies have seemed to have a better position to find global financial issues than in the past. Exchange rate flexibility is the result of this and an improvement in macroeconomic management.

Strengthening the Financial System

The problem with tackling the global financial crisis is making the financial system more stable. There have been efforts, such as regulatory and supervisory measures, to find ways to strengthen the banking sector. These global systemically banks are located in Japan, the United States, China, and Europe. The objective is to build a strong balance sheet for larger banks and improve their capital and risk management positions. Economists are believed to agree that balance sheets strengthened ever since the global financial crisis has happened. Over the years, banks have made improvements in addressing overhanging problems. An example of this would be writing off bad loans. Even though there are visible improvements, it is unknown how balance sheets are vulnerable. The progress through this has been uneven, and there are many European banks that are having issues reducing the amount of loans that are non-performing. Because of the “too big to fail” situation, this circumstance has been slow, revealing the need to further build national resolution mechanisms, not only but also developing cross-border resolution planning.


All in all, modest economic growth will continue to build in fiscal revenue growth. There are efforts to try to get rid of growth that is constrained. Even though there is a decline in inflation and poor economic activity, there is still improved financial stability. The South American banks that are located in Colombia, Brazil, and Peru have progressed and eased monetary policy in the year 2017. Brazil cut its policy rate from 14.25 percent in October 2016 to a current 8.25 percent, the lowest level it has now been low since the year 2013. While South America is gaining, recovery and economic slack are diminishing. Eventually, the monetary cycle is expected to result to an end. Negative shocks and policy rates are also seen to remain and stay stagnant over the next year. In the future economy, there should be a control of monetary policy that will be possible in the near forecast period to come.

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