Student Number: 18033562
Student Name: Kamran Hussain
Selected Economic Indicators and Challenges for Monetary Policy in France
Table of Contents
Pattern of GDP Growth 2,3
Relationship between unemployment and Rate of Inflation .4,5
Exchange rate Country Currency 6
Interest Rate 6,7
Economic pointers portray the big-picture of the economy of France. The GDP is the one of the main indicators for the country which comparison to other countries. France has good trade relationship to other country also it has open economy which monetary policy of the country is controlled by central bank. The monetary policy framework is reliant on the performance of certain specific economic indicator such as GDP, Inflation, Unemployment. The set of indicators efforts to elasticity an imprint of the general economic well-being of a specific geography. It can help depositors measure whether financial markets are in line with financial essentials or if theres a divergence. This indicates moreover a run-up in economic markets ahead of rudiments that are lagging. This data can be useful for investors when theyre making savings and asset distribution results.
Figure 3 .1: GDP in France Q2 2016 TO Q2 2019 (per cent change, annualized)
The GDP of a country is one measure of the size of the country’s economy. The GDP numbers can be used to compare the economies of countries or states. As can be seen from this graph, at the beginning of the period, in 2016-Q2, the GDP in France 0.42. Whereas, the period GDP in France 2016-Q3 to 2016-Q4 increased dramatically because demand-side factors, such as interest rates can affect the spending power of customers. Lowering the interest rate decreases the monthly mortgage rates, which leaves more spending money for families. Between 2017-Q1 to 2017-Q4, there is a small change of nearly 0.71. The GDP in France, decline dramatically 0.78 from 2018-Q1 to 2018-Q4 which means GDP can drop as a result of shifts in demand, increasing interest rates, government spending reductions, and other factors. A closer to the GDPs trends in the year 2018-Q4 to 2019-Q1 rise then after the decrease.
Source: OECD 2019
Figure 3.2 Unemployment and Inflation in France
Time Unemployment Inflation
2016-Q2 9.997443 -0.006639224
2016-Q3 9.977459 0.2796924
2016-Q4 10.03309 0.5002168
2017-Q1 9.570063 1.23312
2017-Q2 9.463154 0.8863953
2017-Q3 9.583513 0.8699406
2017-Q4 8.974315 1.141454
2018-Q1 9.201378 1.360432
2018-Q2 9.079613 1.895423
2018-Q3 9.14246 2.248264
2018-Q4 8.812818 1.896263
2019-Q1 8.66811 1.221344
2019-Q2 8.4382 1.12385
Source: OECD 2019
Firstly, inflation, means are the rise in the prices of goods & facilities over time inflation the purchasing power of each unit the value of the currency. France’s inflation has decreased the value of the euro. As prices rise, your money buys less. Secondly, unemployment occurs when a person who is actively searching for employment is unable to find work. As can be seen from the graph, the relationship between inflation and unemployment has traditionally been an inverse correlation. Inflation and Unemployment are two of the most closely monitored economic indicators, we’ll delve into their relationship and how they affect the economy. Besides, higher inflation is associates lower unemployment. When inflation -0.006 that time unemployment is 9.997 that means both are an inverse relationship. Between 2016 Q2 to 2017 Q1 inflation has increased slowly, as a result, the goods of France are becoming more internationally competitive increasing exports and growth at the same time Unemployment remains almost unchanged. Moreover, the period between 2017 Q2 to 2019 Q2, just a little change, whereas the inflation remains steady that means both are an inverse relationship.
Figure 3.3 Euro: US Dollar exchange Rate October 2017 to October 2019
Source: Bank of England
The exchange rate means which one currency will be altered to alternative currency such as USD Dollar to Euro. It has been shown that in 2018 the rate of EURO and USD Dollar was 0.84 after that November 2018 had increased dramatically. Besides the period between 2017 November to 2018 January, the rate declined tremendously. Between April to August went to peak position that was 0.8794. The Euro & USD slowly increase the time between August 2018 to September 2019, the rate is nearly 0.954. the reason for the change exchange rate in France tourist exchange rates changes when the demand for a currency goes up or down. Demand could change for many reasons, such as augmented business movement interest rates in a country. The total travel money you receive will fluctuate from day to day according to the exchange rate at the time of purchase.
Figure 4.4 Monetary Policy in France
Time Period 2019-04 2019-05 2019-06 2019-07 2019-08 2019-09
M: XM 0 0 0 0 0 0
Source: BIS 2019
The fiscal guideline is the movement by which the money related master of a nation, distinctively the national bank boards either the charge of extremely transient obtaining or the financial base, frequently coordinating a swelling rate or loan cost to ensure value robustness and general trust in the cashAs can be seen, the policy rate is zero Euro area as when nominal interest drops less zero percent exact economic zone denotation bank another financial firm would have to pay to retain their additional replacement kept at the central bank in France rather than obtain positive interest income.
The main challenges for the monetary policy of the country is the shifting GDP rate which also affect long run growth prospect of the country. Besides, another low inflation always good for country which contributes towards economic stability. The other test it would face is from the developing swelling rate. The arrangement utilized by the administration was effective in tending to the joblessness issue in the nation however it has prompted the expansion in the swelling rate. The legislature may diminish the measure of cash in the hands of the individuals by expanding the loan costs in the nation. This would mean less request in the market. Diminishing in the interest for the items in the market would naturally lessen the cost of the item and thusly the swelling rate too.
OECD (2019) Quarterly GDP (indicator). (Accessed 24 October 2019).
OECD (2019) Quarterly UNEMPLOYMENT (indicator). (Accessed 22 October 2019).
Bank of England (2019) Euro to Dollar Exchange rate (Accessed 24 October 2019).
BIS (2019) Central Bank Policy Rate. (Accessed 26 October 2019)