Maslow Hierarchy of Needs - 936 Words

Maslow Hierarchy of Needs Essay The Maslow’s Hierarchy of needs was originally developed by the Psychologist Abraham Maslow; his theory basically describes the stages of the human needs which he explained through in his paper A Theory of Human Motivation. The first and most important need for a person is physiological: these are the physical requirements for human survival, without these requirements the human body could not function properly. These are the most important needs to fulfill and should be met first. Some examples of physiological needs are: water, food, sleep, sex, breathing, excretion and homeostasis. One product that would satisfy this need would be Dasani, bottled water which is a product of the largely Coca-Cola†¦show more content†¦A service that fulfills this need is the Ritz-Carlton Hotel Company. This hotel now a day is owned by Marriott international chain. It offers customers a service of hospitality and tourism, always located in the heart of famous cities. Also is one of the most known and prestigious hotels in the world who provide guests a service of lodging and a wonderful experience of an incredible night. Customers buy this service because they want to feel the experience of being part of this prestige hotel and it’s a very high quality five stars service, which it involves an expensive price but people pay this to feel this experience and feel good about themselves, it’s a luxury. In conclusion, I think that Maslow’s hierarchy of needs is an effective theory that describes the stages of human needs, which can be used as a reference for many people, societies and also for many companies for the purpose of organization and personal development. We cannot have automatic self-actualization without passing through the first needs, each are steps that shows different motivation needs, in its hierarchy Maslow’s describes them step by step, even though some of this needs may occur at the same time. References Maslow, A.H. (1943). A theory of human motivation. Psychological Review, 50(4), 370–96. Retrieved from http://psychclassics.yorku.ca/Maslow/motivation.htm Maslow, A.Show MoreRelatedMaslow Hierarchy of Needs766 Words   |  4 Pages1943, Abraham Maslow developed a theory in psychology known as the Hierarchy of Needs. Maslow’s Hierarchy of Needs is mostly often used as a pyramid, as shown on the title page. One of the many interesting things that Maslow noticed, is the layers of physiological needs, safety and security needs, the needs for loving and belonging, esteem needs, and self-actualization, in that order(working from the bottom layer of the pyramid up). The physiological needs include the basic needs that are vitalRead MoreMaslows Hierarchy of Needs1409 Words   |  6 Pagesset of needs that motivate our communication and our responses to messages. While not everyone’s priorities are identical, our needs resemble one another’s† (Steinberg, 2007:22). This assignment will discuss Maslow’s hierarchy of needs. It will look at real life examples of each component. It will also identify and explain each component. An appropriate diagram will be given to support my answers. At the end of this assignment one should have a full understanding of Maslow’s hierarchy of needs. 2. ExplanationRead MoreMaslow s Hierarchy Of Needs1741 Words   |  7 PagesMaslow’s hierarchy of needs and Herzberg’s. The Maslow’s hierarchy of needs include five levels, and at the certain extent, reflect the rule of human s activities on psychological and behavior. Herzberg’ describe the more details of worker agree or disagree about working. In this essay, more related knowledge details and effects will de described, then, analysis the two theories individual, choose a better one. II. Describe the two theories. 2.1Maslow’s hierarchy of needs The Maslow’s hierarchy of needsRead MoreMaslow‚Äà ´s Hierarchy of needs1220 Words   |  5 Pagesï » ¿Maslow’s Hierarchy of needs Abraham Maslow foster the Hierarchy of Needs model in 1940-50s USA, and the Hierarchy of Needs theory remains valid today for understanding human motivation, management training, and personal development. Indeed, Maslow s ideas surrounding the Hierarchy of Needs toward the responsibility of employers to provide a workplace environment that encourages and ability of employees to carry out their own unique potential (self-actualization) are today more related than everRead MoreMaslow s Hierarchy Of Needs1524 Words   |  7 PagesSummary of Maslow’s The Hierarchy of Needs Abraham Maslow developed the theories of motivation because he felt that the sophistication of human behavior could not be portrayed through reinforcement or rewards. He felt that human action were directed toward realization and fulfillments and that behavior could be gratified while using multiple types of needs at the same time. Maslow wanted to find positive motivation as to why people react or engage in certain behaviors. He felt that basic survivalRead MoreMaslow s Hierarchy Of Needs1536 Words   |  7 Pagesunderstanding of how to motivate different personality types. In the research I am going to compare Maslow’s hierarchy of needs against Lawrence and Nohira’s 4 drive theory in an attempt to better understand their possible uses inside an organizational structure. Let’s first take a look a look at the two theories before discussing their potential benefit. Maslow’s Hierarchy of Needs. We need to keep in mind that Maslow’s field was phycology, so his research was done from a medical viewpoint more soRead MoreMaslow s Hierarchy Of Needs896 Words   |  4 PagesMaslow’s Hierarchy of needs The purpose of this paper is to explain Maslow’s hierarchy of needs and to explain his describe who and what they are. I will also give a short description of who Maslow was and that things he accomplish while pursuing his educations. Abraham Harold Maslow was born April 1, 1908 in Brooklyn, New York. He was the first born of seven children to his uneducated Jewish family from Russia. With his parent pushing him hard to succeed academic he became very lonely and foundRead MoreMaslow s Hierarchy Of Needs1295 Words   |  6 PagesMaslow’s hierarchy of needs (p. 379 in EP)? Outline each level and discuss how it relates to motivation. Abraham Maslow was born in 1908 in Brooklyn, New York. He originally studied law because of the influence of my parents, but after marrying his first cousin, Bertha Goodman, and moving to Wisconsin, he became interested in psychology. After achieving his Masters in Psychology, Maslow moved back to Brooklyn and started teaching at a school there. â€Å"One of the many interesting things Maslow noticedRead MoreMaslow s Hierarchy Of Needs982 Words   |  4 PagesAbraham Maslow was one of the most influential and important educational psychologists and is recognized by many for his theory on mankind’s hierarchy of needs. Maslow’s theory which is known as â€Å"Maslow’s Hierarchy of Needs† is best explained as a pyramid of needs that we as humans must meet in order to progress to another stage of needs. There are five stages in the pyramid of needs and they go as follows: physiological, safety, love and belongingness, esteem, and finally self-actualization. MaslowRead MoreEssay on Maslow Hierarchy of Needs1486 Words   |  6 PagesThe Study of Maslow Hierarchy of Needs This essay study is about Maslows school of thought. Maslows hierarchy of needs is often depicted as a pyramid consisting of five levels. I liked the way he differed from traditional psychologists. For example, he studied happy, high performing people to learn more about what they had in common. Maslows main contributions to psychology were the founding of the Journal of Humanistic Psychology in 1961. There were many occurrences during his lifetime that

My Exercise On My Muscle Strength - 1148 Words

My muscle strength is nearly gone, I do not know how much longer I can hold my body in this position, and sweat is falling from my face like rain in a hot jungle. My tiny, blonde torturer is exceptionally sadistic this evening. I imagine that she has harnessed all of her day’s spite in order to exude it upon me with the calm, controlled voice of a person completely at peace with her actions. It is at this moment that I begin to second-guess my decision to take up hot yoga. The benefits of the practice are clear: increased flexibility, mental focus, core strength, and protection from injury. All good things, but am I tough enough to make it through the severe discomfort of this initial learning curve, to see the results in myself†¦show more content†¦The misconception about flexibility is that improvement only comes from forcing the body into positions of increased range of motion. In reality, it is less about active force and more about releasing control and all owing the body move into extended positions. â€Å"The ability to relax a muscle group is an important part of flexibility; the ultimate expression of this is seen during general anesthesia† (Rippetoe, Baker, Bradford, 2013). General anesthesia being impractical for regular flexibility improvement, yogis rely on position holds and focused breathing to distract the mind and nervous system from the ridged control they usually have on the body. Recovery drill exercises are very similar to yoga poses, the most obvious of which is the extend and flex which is a â€Å"by-the-numbers† version of upward-facing dog flowing into downward-facing dog. With this association in mind, it is a simply a matter of educating Soldiers on how to get the most benefit out of recovery drill exercises, directing that these exercises be held for the full 30 seconds available and possibly cueing their breathing patterns to keep them focused. Increased flexibility allows the body to reach fu ll ranges of motion and a body operating in the full range of motion is potentially less likely to be injured. Approximately 98 percent of injuries are avoidable, caused by lack of range of motion and improper movements. The twoShow MoreRelatedThe Strength Test Of The Cardiovascular Endurance Test My Heart Beat1480 Words   |  6 Pages1. So what were your scores? Were there any surprises? How so? (5 pts) Some of my scores did not surprise me but they were disappointing. During the cardiovascular endurance test my heart beat was 119 beats per minute. I was expecting this and was not surprised at all because I have always avoided doing cardio, the most I do is walk my dog, take the stairs, or use the elliptical. I cannot even remember the last time I ran. Actually, I thought I was going to do a lot worse. TheRead MoreFinal Exam : Phe 101 Essay1241 Words   |  5 PagesFitness – Cardiorespiratory Endurance, Flexibility, Muscular Strength and Endurance and Body Composition. There are five components to fitness: body composition, cardiorespiratory endurance, flexibility, muscle strength, and muscle endurance. Body composition is the amount of muscle, bone, fat, etc. that makes up our bodies. Cardiorespiratory endurance is the body’s ability to provide enough energy to sustain submaximal levels of exercise continuously. Flexibility is the movement available at theRead MoreMuscular Development and Nutrition1297 Words   |  5 Pagesadmiring my older brother Tyson Jenke who is a personal trainer at Goodlife, Burnside. Because of my strong interest into this field of material, I thought it would become suitable and effective to use this drive as my focus topic for research project. Because in the future I hope to become muscular and shredded, I figured that I am going to have to inevitably study this material, so why not study it as part of my research project. Thus creating a topic question: â€Å"If I wanted to gain muscle mass whatRead MoreEssa y on Fitness Programme to Build Up General Strength and Stamina764 Words   |  4 PagesGeneral Strength and Stamina The aim: of this fitness programme is to build up general strength and stamina. I am hoping to use roughly sixty per cent of my maximum heart rate. It will be completed over a six week period whereby I will complete. The purpose of this is to build up my general body strength and stamina; I am trying to improve those components for my Basketball. 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The Determinants Of Mutual Fund Growth In Pakistan - Free Essay Example

Sample details Pages: 19 Words: 5742 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? This study is actually about the mutual fund growth and the determinants which are influencing on the growth of these funds. We ask whether the growth of funds is influences by the management fee, family proportion and the expense ratio or not. How much these variables influenced the growth of funds. Don’t waste time! Our writers will create an original "The Determinants Of Mutual Fund Growth In Pakistan" essay for you Create order We further check out the relation of the family assets and the return on the funds with the performance of the funds. Investors are paying the charges to control the funds and for the growth of the funds in the shape of management fee and the administrative charges. We study the behavior and the output of the funds from the duration of 2005-2009. We selected the funds which are listed in KSE. The funds are selected which are in the family proportions because of the nature of regression model which is used for the calculation of the effect of determinants on the growth of the funds. We use two models for the interpretation of the data. These are fixed effect model and cross section model. Through these models we elaborate the effects of different factors on the growth of these funds. We focus on the management fee for checking the efficiency of the funds management. Whether these are contributing in the growth of the funds or not, if not then these fee is only for the benefit of funds management INTRODUCTION In Pakistan the mutual fund industry handles a significant portion of the assets of individual investors. Basically there are many factors which can affects on the growth of the mutual fund. In these determinants of the mutual funds which can affect the growth of the mutual fund we are focusing on the management fee, the main focus is on the charging of the management fee and its impact on the growth. Whether it is beneficial for the growth or not? Along with this we are determining some other major determinants of which can influence on the growth of these funds in Pakistan. Compensation to managers is primarily in the form of a Management fee. With few exceptions, Management fees are charged as a percentage of the assets under management rather than on the basis of performance. It is therefore in the interest of management to grow the total assets in the fund and in the associated fund family. One tool that managers may use to grow funds is the Management fee. The fees, which are limited to1% to 3% per year as Management fee, are used to cover administrative costs. This paper studies whether or not the charging of a Management fee support the investors by growing the worth of mutual funds family along with that of some other determinants. Next we checked that the charging of Management fee leads to greater cash inflow for the funds which charge them. We focus on various mutual funds existing in the Karachi Stock Exchange and listed there, in order to control for the variety of commission payment schemes associated with management fee charging funds that are now available to shareholders and are in the group of families charging Management fee. LITERATURE REVIEW These are some of the review from the experts and the researchers. Academic opinion on mutual fund fees is generally critical. Bogle, points out that the average cost of owning mutual funds has risen over 100 percent in the last sixty years. Freeman and Brown contend mutual fund advisory fees alone are excessively high. In their view the mutual fund industry is dominated by conflicts of interest where the mutual fund boards fail to negotiate arms-length management contracts with asset managers. In their view asset managers are over compensated for the services that they provide. Similarly Ang, Chen and Lin argue that the primary benefit that managers can provide to the shareholders is the reduction of expenses. The reason is that management has more control over expenses than over any other aspect of the return to the shareholders. Therefore, if managers are not working to reduce expenses they are failing to carry out their primary duty to the shareholders. Golec found that fund managers are compensated primarily on the basis of a percentage of the assets under management. That compensation scheme provides fund managers with a strong incentive to grow fund assets regardless of the degree to which such growth is consistent with shareholder welfare. Collins, along with Livingston and ONeal (1998) and ONeal (1999) argue that some investors pay to receive professional investment advice and assistance in the purchase of mutual funds. Essentially they argue that brokers provide some combination of resolving asymmetric information for investors and providing a needed service in completing and maintaining the required records in order to complete the investing process. We closely examine the issue of whether brokers primarily resolve asymmetric information or primarily provide investors with record completion and maintenance services. One way to grow the assets is to well manage the fund by the fund management of that varies funds. Management fees provide a source of funds for controlling and managing the funds. Naim Sipra (2008) one of the interesting things to note is the low correlation between the funds and the market portfolio. In US studies the correlation between the market and mutual funds is often 0.9 or above. A high correlation with the market is an indication of a high degree of diversification. The low correlation in the Pakistani case suggests that the mutual funds are not doing a very good job of diversification. The low correlation and also the low betas are probably due to inclusion of fixed income securities such as the Term Finance Certificates (TFCs) in the portfolios of these funds. Since the composition of the funds is not publicly known therefore it is not possible to analyze this issue any further. Ali S M, Malik A S (2006) A Capital markets play a vital role in the economic development of a country. It is now widely accepted that there is a direct correlation between economic growth and the development of the fina ncial sector. Mutual funds are considered to be an important source of injecting liquidity into the capital markets. A well established financial intermediation system facilitates the economic activity by mobilizing domestic as well as foreign savings. Muhammad Akbar Saeed (2004) during the last two years, mutual fund sector has more than tripled in size to Rs. 112 billion (as of 31-Dec-04). The industry players are predicting that the business is likely to grow by 200 percent over the next five years. The success of the industry will lie in several factors, one of which will be the role of regulators and their efforts to continuously evolve the code of corporate governance for the mutual fund industry. Moeen Cheema and Sikandar A. shah (2006) Mutual funds are becoming vehicles of securities investments most favored by the general public worldwide. Whereas, this trend is more pronounced in the developed securities markets of the United States of America and Europe, mutual funds a re increasingly gaining the public attention in the developing economies as well. Pakistan is not an exception to this global trend and even though mutual funds form a comparatively small segment of the securities markets, they have grown phenomenally over the last few years. According to the Mutual Fund Association of Pakistan (MUFAP), whereas mutual funds may not shield investors from the risks associated with overall market failure, the ability to diversify that they provide may reassure public investors as regards the failure of individual companies and hence make them less wary of insider opportunism in any given corporation. We similarly consult some of the related articles for this purpose, which can be seen from the references. We also consult some of the conflicting matters with the course instructor. In summary, Management fee is basically for the controlling of the mutual funds and for the growing purpose of the funds. But is it working well for the growth of the mutua l funds which funds are being charging this fee. HYPOTHESES AND METHODOLOGY This paper studies whether the shareholders income and their wealth increase from the growth of the mutual funds through the charging of Management fees. The main focus on the Management Fee but there are some other determinants like family proportion, expense ratio, return through sharp ratio and assets turnover in that specific duration which we selected for the research purpose. There are a number of ways in which investors could enjoy by the growing of wealth from funds which charge this fee. Since the fee is used for administrative expenses. It could aid investors by making them aware of high quality managed funds that might otherwise be invisible to them. There are several possible examples of funds where this might apply. First, funds charging this management fee lead the higher total returns. Funds with greater total returns would benefit investors in that, if the superior performance was persistent, investors would have a higher terminal wealth from investing in these f unds than they would have from investing in other funds. A fee showing the existence superior total returns would be of great of interest to investors. The null hypothesis: Ho: There is no difference between the total returns of mutual funds that charge the Management fee and those that do not charge the Management fee will be tested. Second, the Management fee might be a signal to investors of a greater risk adjusted rate of return. A greater risk adjusted return would imply that investors could earn superior returns with less chance of loss with respect to other portfolios offering the same level of return. The second null hypothesis to be tested is: Ho: There is no difference in risk adjusted returns between the risk adjusted return of mutual funds that charge the Management fee and those that do not charge the Management fee. 2nd hypothesis will be tested using Sharpe Ratio. It needs to be noted that these null hypotheses could be rejected either because the funds charging the Management fee over perform or because they under perform. If there is persistent over performance, the over performance is in the interest of the investors. However, persistent under performance would mean that the fee being paid by the investors is being used to let them know that these mutual funds are not performing well that will leave the investors with less terminal wealth. Such a result would be consistent with the view that Management fees are inconsistent with shareholders income growth. Third, the funds charging the Management fee could be the funds that have lower expense ratios. The numerator of the expense ratio includes all of the operating costs of managing the fund; including the management fee and other administrative costs as well as all the expenses. It may be that after the Management fee is removed from the expense ratio the fund has lower expenses than other funds. Such a result would support the idea that the fee itself is merely a substitute for other costs and that the investor in such a fund is no worse off, and could be better off than the investor in a fund that does not have the fee. The null hypothesis to be tested is: Ho: There is no difference of the expense ratios of the funds on the growth of the mutual funds. 3rd hypothesis will be tested after subtracting the Management fee from the expense ratio. The null hypothesis could be rejected because the funds charging the fee have lower expense ratios or because the funds charging the fee have greater expense ratios. In the first case the management fee would be in the interests of shareholders and in the second case the fee would not be in the interests of shareholders. If it is found that the management fee is not supporting the growth of the mutual funds of shareholders, the other alternative is that the fee is in the favor of the fund management. It would be in the interest of fund management to charge the management fee if the existence of the fee le d to faster asset growth than could otherwise be expected. Management desires faster asset growth because of the manner in which management is compensated. Fourth, managers might be using management fees to grow funds more rapidly than they would otherwise be growing. The growth of the fund from time t to t+1 is defined as: Gi = (Assetst Assetst -1(1+R))/Assetst -1 (1)à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Equation Where Gi is the growth rate in the assets under management by fund i from time t-1 to time t. Assetst are the net assets under management at time t. Since the assets under management may grow either due to new sales or returns, equation 1 eliminates the growth that is due to returns. For all of the funds in the study, the management fee is based on the net assets under management which may provide a managerial incentive to grow the fund as rapidly as possible. Ho: The growth rate of mutual funds that charge management fee is higher as compare to the funds which are not charging the fee. We will test whether the funds that charge the fees actually are growing faster using a regression model that controls for risk adjusted return, asset turnover rate, the relative size of the mutual fund within a family of funds, the expense ratio of the fund other than the management fee and the level of the management fee. Gi = ÃŽÂ ² 0 + ÃŽÂ ² 1RARi + ÃŽÂ ² 2ATi + ÃŽÂ ² 3ASSETi + ÃŽÂ ² 4FAMPROi + ÃŽÂ ² 5ERi + ÃŽÂ ² 6FEEi + ÃŽÂ ² i à ¢Ã¢â€š ¬Ã‚ ¦2) Equation Gi is the growth due to new investment in funds i from previous year t to current year t+1. Growth is defined by equation 1. This sign (?) Measures the sensitivity of the growth rate of the mutual fund to the specified factor in each case. An expected positive sign means that the growth rate is expected to respond positively to increases in the variable. An expected negative sign means that the growth rate is expected to respond negatively to increases in the variable. T he expected sign is specified for each of the control variables. RARi is the risk adjusted returns on fund i from year t to t+1, estimated by using the Sharpe Ratio. In accordance with past findings, this control variable is hypothesized to have a positive sign and does take a positive sign. ATi is the asset turnover for fund i which is measured through the formula of Net Income divided by the Total Assets. Turnover is a measure of investing activity. The greater the turnover, the greater the cost of operating the fund. Holding all else equal, the greater the cost of operating the fund the lower the growth in the fund. This variable is hypothesized to have a negative sign and does have a negative sign. ASSETi is the total assets of fund i at time t. The larger a fund, generally, the older the fund is so that assets serve as a proxy for the age of the fund. The older a fund, the more well known the fund is to the investing public and the easier it will be to sell the fund. A ssets are expected to and do have a positive relation with growth. FAMPROi is the proportion of the mutual fund family assets made up by fund i. The larger the proportion of the family assets in the fund the slower will be the growth, as management efforts will be directed primarily at the newer, smaller funds. This variable is expected to have a negative sign and generally has a negative sign. ERi is the expense ratio of fund i , less the management fee from all the expenses. The expense ratio includes all of the costs that the management company charges to the fund including the management fee, trading costs, and any other expenses. Since the purpose of the test is to isolate the effect of the management fee, that fee is subtracted from the expense ratio. The greater the expense ratio, the lower the growth. Investors should prefer a lower cost fund to a higher cost fund. The variable generally has the expected negative sign. FEEi is the level of the Management fee. For th e vast majority of the funds in the study, this variable will be charged by 1% to 3%. It is expected that the null hypothesis will be rejected and that this variable will have a positive sign which is generally the case. The regression model (Equation 2) is estimated on an annual basis for the years 2004 through 2009 for all funds that have all required data available. Equity and fixed income funds are examined separately. A positive and significant sign on the FEE variable will lead to a rejection of the null hypothesis and will be consistent with the idea that the Management fee is used by management to increase growth in assets. There are two economic rationales that apply to the imposition of the Management fee on mutual fund investors. The first is that investors are the primary beneficiaries. The second is that fund management is the primary beneficiary of the fee. The major contribution of this paper is to determine whether the facts are more consistent with the investo rs or the managers being the beneficiaries for mutual funds. THE DATA All of the data are taken for the years 2004 through 2009. Since 2004 is the first year and lagged data is needed, the results are presented for all funds for which all data was available for 2005 through 2009. The data are summarized in the table form and data is regarding the equity funds. As far as the collection of the data is concerned so we consult many sources for the collection of the data. Mainly we collect it from KSE. From where the full data was not available and after that we consult the Business recorder, Statistical Bulletin of Pakistan [Federal Bureau of Statistics (2005)] for 2005-2009 and SBP for the collection of the financial reports and the kibor rates. The net asset values are collected from the KSE as well as from Brecorder. The data available in the form of tables and excel sheet which is attach along with this article. Mainly we collect the data of the equity mutual funds. Our focus was on most commonly known mutual funds of the Pakistan market. We selected almost 21 mutual funds from the KSE available sources but because of the running of Regression Model, for which we need only the family funds which are in the form of groups. We neglect the individual funds because of the family proportion concern. So now the data available is of 13 mutual funds which are in the form of family. From that we could generate the family proportion of the mutual funds assets. Because the amount of the data was less for five years so we take the data in the panel form representing through panel EGLS. RESULTS These are some of the results which we conclude from the help of the CROSS SECTION MODEL FIXED EFFECT MODEL. In econometrics and statistics, a fixed effects model is a statistical model that represents the observed quantities in terms of explanatory variables that are all treated as if those quantities were non-random. This is in contrast to random effects models and mixed models in which either all or some of the explanatory variables are treated as if they arise from the random causes. Often the same structure of model, which is usually a linear regression model, can be treated as any of the three types depending on the analysts viewpoint, although there may be a natural choice in any given situation. In panel data analysis, the term fixed effects estimator (also known as the within estimator) is used to refer to an estimator for the coefficients in the regression model. If we assume fixed effects, we impose time independent effects for each entity that are possibly correlate d with the regressors. The major attraction of fixed effects methods in non-experimental research is the ability to control for all stable characteristics of the individuals in the study, thereby eliminating potentially large sources of bias. Within-subject comparisons have also been popular in certain kinds of designed experiments known as changeover or crossover designs (Senn 1993). In these designs, subjects receive different treatments at different times, and a response variable is measured for each treatment. Ideally, the order in which the treatments are received is randomized. The objective of the crossover design is not primarily to reduce bias, but to reduce sampling variability and hence produce more powerful tests of hypotheses. Fixed effects methods cannot estimate coefficients for variables that have no within-subject variation Time-series cross-section (TSCS) data harness both cross-temporal and cross spatial variation to maximize empirical leverage for theory ev aluation. However, this powerful data structure also requires careful consideration of temporal and spatial (cross-unit) heterogeneity, temporal and spatial dynamic processes, and potentially complex stochastic error structures. In the table 1 which is descriptive table and that is showing the mean, median and standard deviation as well. As it is clear and shows from the descriptive table that the sharp ratio, which is basically the return calculation through the sharp measure, is the negative impact on the growth of the mutual fund. As you will increase the return on the funds or the return increases over the amount of the funds the impact of it is negative on the growth of the mutual fund. Similarly the coefficient of this sharp ratio is also negative impact on the growth of the mutual funds. Now secondly, the asset turnover showing, the mean in the descriptive table representing the negative value which means that if the asset turnover will be negative so it can reduce the gro wth of the mutual funds. Assets are in the positive form and they show that if the asset of the fund increases so it means that the impact of this on the growth of the fund is positive and it contribute in the growth of the mutual fund. The family proportion of the mutual fund should have the positive impact on the growth of the mutual fund and in the table 1 of the descriptive result, the result of this is positive so it means that the family proportion increasing in this which is the positively impacting on the growth. Expense ratio is resulting negatively on the growth of the funds, and the management fee which is the basic testing of this is also showing the negative impact on the growth of the mutual funds in Pakistan. TABLE NO. 1 Descriptive Analysis GR SR AT ASSET FP ER FEE MEAN 3.989 -1.096 -0.008 2633207 0.365 1.262 54455166 MEDIAN 0.005 -0.540 0.010 1435134 0.410 1.260 38342000 MAX. 63.590 2.290 0.450 14193216 1.000 10.900 2.49708 MIN. -27.660 -5.010 -1.070 0.00000 0.000 0.000 0.00000 STD. DEV 12.763 1.470 0.272 3060791 0.255 1.644 53774795 SKEW. 2.134 -0.946 -1.834 1.951847 0.187 4.008 1.599424 PROB. 0.000 0.004 0.000 0.0000 0.729 0.000 0.0000 SUM 259.290 -71.278 -0.525 1.71608 23.400 82.060 3.54709 OBS. 65 65 65 65 65 65 65 TABLE NO. 2 Correlation Matrix DETERMINANTS GR SR AT ASSETS FP ER FEE GR 1.000 -0.269 -0.578 -0.163 0.062 0.100 -0.146 SR -0.269 1.000 0.360 0.124 0.174 -0.186 0.132 AT -0.578 0.306 1.000 0.139 0.071 -0.403 0.125 ASSETS -0.163 0.123 0.193 1.000 0.503 0.084 0.972 FP 0.061 0.174 0.071 0.503 1.000 0.270 0.538 ER 0.100 -0.187 -0.403 0.084 0.270 1.000 0.058 FEE -0.146 0.133 0.125 0.972 0.538 0.058 1.000 Now further according to the table 3 which is Fixed Effect Model, we design a panel least squares method in this model for the calculation of the data, in that the sharp ratio is resulting in the negative form and show the result that as the return on the mutual funds increases the growth effected negatively. The coefficient of the sharp ratio is negative and the result is showing significance, which is acceptable. After that assets turnover of it is in negative figure which shows a negative impact on the growth and the prob. Is significance we are keeping the level of the significance here is 0.10. The coefficient of the family proportion is positive thats good for the growth of the mutual fund but it is not significance because the prob. is higher than the level of significance. The expense ratio is showing the negative result, which means that the increase of the expense ratio is a negative impact on the growth of t he mutual funds. Its coefficient value is negative and the value is significant according to the fixed effect model. Now comes the management fee, according to this model the management fee is resulting in the positive value for the fund, that means that the funds that using the Management fee are contributing in the better growth of the fund because the coefficient value is positive but according to this model the fee is not significant here, the result is that the funds charging the fee can make the funds growing as compare to the funds that are not charging the management fee. The factor we assume here that the management fee effect positively for the growth of the funds but because of the political instability and the country economic situation it is not resulting good in the growth of the mutual funds in Pakistan. Lastly according to this model, value of Lassets is positive and the significant level is good which shows the Lassets significant. We take the assets here despite of the assets because of the mismatch and not the proper results from the assets. So it is impacting positively on the growth of the mutual fund. If it increases the mutual fund growth will increase. TABLE NO. 3 Fixed Effect Model Dependent Variable: GR Method: Panel Least Squares Sample: 2005-2009 Total panel (unbalanced) observations: 64 Cross-sections included: 13 DETERMINANTS COEFFICIENT STD. ERROR T-STATISTICS PROB. SR -3.772 1.532 -2.462 0.018 AT -24.784 7.253 -3.417 0.001 LASSET 0.447 0.155 2.878 0.006 FP 4.932 9.653 0.512 0.612 ER -2.250 1.054 -2.135 0.038 FEE 1.637 1.427 1.144 0.258 CONSTANT -1.456 4.251 -0.343 0.734 EFFECTS SPECIFICATIONS CROSS-SECTION FIXED (DUMMY VARIABLES) PERIOD FIXED (DUMMY VARIABLES) ADJUSTIFIED R-SQUARED 0.438 MEAN.DEP BAR 4.051 S.E OF REGRESSION 9.639 S.D. DEP BAR 12.859 SUM SQUARED RESID 3810.045 SCHWARZ CRITERION 8.418 LONG LIKELIHOOD -221.580 F-STAT. 3.227 DURBINà ¢Ã¢â€š ¬Ã¢â‚¬Å"WATSON STAT 1.896 PROB F-STAT 0.000 In table 4 and 5, we use the CROSS SECTION MODEL (cross section random effects cross section weights), according to both of these methods the calculations are same, the coefficient values and the significant are same. The assets turnover is showing the negative value which shows according to it that the more assets turnover can impact the growth of the mutual funds and the value is significant in both methods as well as in the fixed effect model. The value of the sharp ratio means the return of the mutual fund is showing coefficient negative in the random effect method that means that the increase of the return value can effect the growth negatively and growth is less when this return value is high while the value is significant which means it is good for the growth of the mutual fund and same value is showing in the fixed effect method. But in the cross section weights method the value of the return is positive and it is not significant there. So it shows here a that the higher return impact the mutual fund growth positively means higher the return higher the growth of the mutual fund nut it is nit the case here. Family proportion of the mutual funds according to the both methods says that the results are showing positive relationship in the growth of the funds and the higher the family proportion. The values are significant according to the probability measures. Expense ratio according to both of these models reflects the results that expense ratio is impacting the growth of the funds negatively. Means as the ratio of the expense increase the growth is going to be less for the mutual funds. The coefficient value of the expense ratio is in negative value and the value in both the methods shows that this is significant. As far as the Management fee is concerned here so according to the both methods the management fee is impacting on the growth inversely. The coefficient value in both the cases is negative means if the management fee is charged by th e mutual fund management so the growth is less than if they dont charge the management fee. And the value is significant in both the methods. So it is clear from now that according to the Cross Section Model the impact of the management fee is negative on the growth of the mutual funds. The management who is charging the management fee their growth of the mutual funds is less and downward. TABLE NO. 4 Cross Section Weights Dependent Variable: GR Method: Panel EGLS (Cross Section Weights) Sample: 2005-2009 Total panel (unbalanced) observations: 54 Cross-sections included: 13 Linear Estimation after One-Step Weighting Matrix VARIABLE COEFFICIENT STD.ERROR T-STAT PROB SR 0.439 0.825 0.532 0.596 AT -32.916 3.815 -8.628 0.000 FP 4.404 3.353 2.506 0.016 ER -2.032 0.719 -2.825 0.006 FEE -5.297 1.997 -2.665 0.010 LASSET 0.447 0.155 2.877 0.006 WEIGHTED STATISTICS R-SQUARED 0.788 MEAN DEPENDENT VAR 7.211 ADJ. R-SQRD 0.766 S.D. DEPENDENT VAR 20.513 S.E. OF REG 9.905 SUM SQUARED RESID 4709.255 DURBIN-WATSON STAT 1.785 UN-WEIGHTED STATISTICS R-SQUARED 0.396 MEAN DEPENDENT VAR 4.801 SUM SQUARED RESID 6164.67 DURBIN-WATSON STAT 1.521 TABLE NO. 5 Cross Section Random Effect Model Dependent Variable: GR Method: Panel EGLS (Cross-Section random Weights) Sample: 2005-2009 Total panel (unbalanced) observations: 64 Cross-sections included: 13 Swamy and Arora estimator of component variances VARIABLE COEFFICIENT STD.ERROR T-STAT PROB CONSTANT 1.663 2.777 0.599 0.551 SR -1.435 0.972 -1.876 0.952 AT -29.005 5.104 -5.682 0.000 FP 13.775 6.468 2.129 0.037 ER -2.021 0.866 -2.134 0.023 FEE -3.497 2.877 -1.217 0.228 EFFECTS SPECIFICATIONS S.D RHO CROSS SECTION RANDON 3.045 0.096 IDIOSYNCRATIC 9.345 0.904 WEIGHTED STATISTICS R-SQUARED 0.432 MEAN DEPENDENT VAR 3.287 ADJ. R-SQRD 0.384 S.D. DEPENDENT VAR 12.429 S.E. OF REG 9.758 SUM SQUARED RESID 5522.350 F-STATISTICS 8.844 DURBIN-WATSON STAT 1.533 PROB (F-STAT) 0.000 UN-WEIGHTED STATISTICS R-SQUARED 0.416 MEAN DEPENDENT VAR 4.051 SUM SQUARED RESID 6076.710 DURBIN-WATSON STAT 1.432 So these are the results from the use of the two different models for the testing of the variables and the impact of the determinants on the growth of the mutual funds. As far as the results are concern so it is clear that in most on the factors like the assets turn over, expense ratio, family proportion and assets the results are same in both the methods. But the concern is from the sharp ratio means the returns on the funds is some little bit difference. According to both the methods the results are same for the return but in the cross section model in which two methods were drawn and only the sharp ratio returns are varying there. In management fee the results are totally different for both of the cases. For the confirmation of the results, all the outcomes and the results are in accordance with the study of Mr. Richard J. Dowen, Thomas Mann (2007). CONCLUSION The basic duty of the management of any firm and the company is to maximize the business and the wealth of the share holders as well as the sustainability of the owners of the company. The management of the mutual funds is charging the management fee for this purpose. The management fee according to them is for the efficient control of the management for the growth of the mutual fund. The study of this article reveals the working and the growth regarding the mutual funds family. The growth of the mutual fund which we examine here is based on the determinants which are effecting the growth of the funds family. According to the result the mutual fund growth is dependant on the negative and the positive impacts of these determinants. We work through two models for the measurement of growth which are fixed effect model and the cross section model. Let us conclude here that most of the results draw by these models is same except of some factors which are the basic theme of this study. The impact of the asset turnover, expense ratio and the return on the investment which is calculated through the sharp ratio has a negative impact on the growth of the mutual funds. It is clear that the increases in the value of these factors cause the less growth of the funds and effect downward the growth of the mutual funds. Whether the factor of the family proportion is impacting and effecting positively on the growth of the mutual funds. As the value or the ratio of the family proportion increases it shows the sign that the growth of the mutual funds increase. Now finally the impact of the mutual fund management fee towards the growth of the mutual fund that to which extent this fee contribute in the growth of the mutual fund. According to the both models, the management fee is resulting differently. In the cross section model the management fee is impacting negatively which is the constraint of this study. Management fee is charging by the funds management is contributing less in the growth. So the cross section model shows that as more and high the fee is charged by the management the less will be the growth of the mutual funds. Secondly the fixed effect model reflects the result that the management fee is contributing to the much growth of the mutual funds as promised by their management advisors. It reflect that the management who is charging the much fee showing and keeping the mutual fund firm towards the high growth of the fund. In the end, the hypothesis results are drawn which were design for the checking of the performance of the fund. As per the calculation of the results the first hypothesis is rejected because the return of the mutual funds is different for the funds that charge the fee and th at not charging the fee. So the first hypothesis is rejected. The second hypothesis is also rejected that the risk adjusted return is same for the funds that charging the fee and on the growth of the funds. Because fro the both models it is clear that the risk adjusted return calculated from the sharp ratio is effecting negatively on the growth of the funds. If return is high so the chances of the less growth is higher. If return is less so chances of the growth is much growth is higher. The third hypothesis is also rejected because the expense ratio can effect the growth of the mutual fund. If the ratio is higher so the growth will be lesser and if the ratio is less the growth of the funds will move towards upwards. According to calculations and from the results of both models, expense ratio has positive impact on the growth of the funds. Lesser the ratio higher will be growth of the mutual funds. Finally the last hypothesis, by applying two models namely cross section model and fixed effect model. As per the results of fixed effects model the value is significant which shows that the funds which charging the fee has higher growth rate and performing well. So the hypothesis will be accepted from fixed effects model. Results of the cross section model reflect that the value is insignificant and growth is effected by management fee. If the management charges fee then their growth will be effected negatively. So from cross section model hypothesis will be rejected.

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Economic Analyses †Netherlands Free Essays

Netherlands National Economy: 2008-2012 Compulsory Assignment April 24 2012 Spur: MM 2nd Sem. Subject: Descriptive Economics Table of contents _ Introduction†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. We will write a custom essay sample on Economic Analyses – Netherlands or any similar topic only for you Order Now . †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦2 GDP†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 3 Unemployment Rate†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦ 6 Inflation Rate†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦9 Conclusion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦. 12 Bibliography†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. †¦Ã¢â ‚¬ ¦Ã¢â‚¬ ¦13 Introduction _ This report is written for the purpose of the completion of a compulsory assignment that was allotted to the second semester students of the Marketing and Management spur. The theory and data that is described herein is related to the subject of descriptive of economics which is a branch of macroeconomic studies. The specifics of the assignment are, according to my understanding, to find a national economy of our choice; analyze the nation’s recent economic growth rate known as GDP (Gross Domestic Product); analyze the inflation rate; analyze the unemployment rate; present visual data to support the written information; explain in advance what GDP, inflation and unemployment is from the definitive perspective. The national economy that I have chosen to analyze is that of the Netherlands. The reason that I have specifically chosen this economy is twofold. Firstly, the Dutch economy it is one of many economies within the European Union that is having difficulties recovering from the global financial crisis of 2008/9 and the current crisis that is further evolving in the European Union, more specific insight to this developing may prove beneficial in the post-graduation period when exploring possible job opportunities. Secondly, the NGO Spark that is channeling capital into International Business College Mitrovica is located in Amsterdam, Netherlands; therefore it is interesting to know what economic environment the organization is surrounded by. Dutch Economy The Netherlands have a long history of trading with other countries in the world and have throughout time become very dependent on trade. The Dutch economy is based on a free market economy system with the government’s main purpose being to set regulations and taxations in the economy. Furthermore, the Netherlands are part of the European Union and have closely bound their economy to the EU by joining the European Monetary Union, that is to say the euro. The Dutch are advocators of free international trade and the reduction and removal of tariffs since it is obvious that they would benefit from more free trade. Past expansions of the Dutch economy were mainly due to an emphasis being put on increasing foreign trade, consumer spending and investment. When compare to other economies the Netherlands rank as the fifth largest economy in Europe with relatively stable industrial relations. When it comes to industrial activities, Netherlands are primarily occupied with food processing. The country is highly technologically advanced when it comes to agricultural development and uses a relatively small labor force to regulate agricultural cultivation. Currently it holds an estimated population of 17 million people. Average unemployment rate in the country is 4. 77 percent; average inflation rate is 2. 08 percent; average GDP growth rate is 0. 61 percent per quarter. Gross Domestic Product (GDP) GDP is the sum in market value of all goods and services (products) that a country has produced in a given span of time, i. e. a year or a quarter of a year multiplied by four. It is a statistical measurement expressed in monetary value. In order to get a comprehensive value of goods and services the prices of those products are added together to get the GDP value. This is only relative to final products and not intermediates such as components that are used to produce the final good or service with the exception of those products that are produced and then stored in inventory; those have momentary or short GDP value. The term â€Å"all goods and services† applies only to the country’s output that is legitimate and legal excluding all products derived from illegal activity and those products that are produced and consumed in a household, i. e. homegrown vegetables used only for personal consumption. Other products that are not included into the GDP are those that are not newly produced and sold, this applies to used goods such as cars or machinery. GDP is not concerned with nationality, e. g. if an individual of American nationality opens a company in the Netherlands producing a particular product and sells it in the Netherlands, that is also counted into Netherlands GDP. There is a clear line between GDP and a GDP growth rate. The GDP growth rate is expressed as a percentage and it uses the Real GDP (GDP or Nominal GDP minus inflation or increases in price). It shows by what rate (percentage) the economy as a whole has expanded or contracted from one period to another period (Mankiw 2008). GDP Netherlands: January 2008 – January 2012 When analyzing the Dutch economy at the peak of the global financial crisis (2009) it is apparent that the Netherlands were affected very deeply (illustrated in the graph above and on the next page). The economy was in a heavy recessive state meaning that the national economy was experiencing a contraction in economic growth or simply put, the national economy was shrinking. The recession or negative growth started in 2008 for the Netherlands dropping from a positive economic growth rate of 0. 5 percent in the first quarter to -0. 4 percent in the second quarter of the year. This recession was by far the worse that the Dutch economy has ever experienced reaching a record low of -2. 2 percent at the end of the first quarter in 2009. The recession was in effect up to mid-2009 with the economy starting to experience positive growth again in the third quarter (0. 8 percent) of the same year. From that point Netherlands GDP was subject to fluctuation in growth rate, however staying well on the positive side of growth all the way up to mid-2011 where the economy experienced another plunge and fell to -0. 4 and -0. 6 percent in the third and fourth quarter of the year. The reasons for the recession in 2008 and 2009 are not of an ambiguous nature. The world as a whole had entered a recession primarily driven by the financial disaster created by the banks in the United States. People all over the world had stopped spending money which led to companies reducing trade and production. These developments had a negative impact on the Dutch economy which receives a large portion of its GDP from trading with other national economies. In addition to the negative turn in trade during the recession the Netherlands also experienced a reduction in traffic in its harbors which serve as a center for European transport and contraction to internal spending form companies and households. When examining the more recent recession beginning in 2011 a number of factors were uncovered in relation to the cause of contraction in economic growth. Again the external environment has had a tremendous effect on the Dutch economy this time sparked by the financial crisis that has been unfolding in the European Union. Starting with ongoing financial and economic breakdown of Greece and more recently Spain and Ireland, the Netherlands have been greatly affected by those countries inability to pay off their debts. This has led to a reduction in trade again for the Dutch primarily because the risk that is now associated with the European Union and its lack in competency in regulating the financial crisis. Further on, internal demand and expenditure has again decreased from households and companies. As to why households have stop spending money there is no single answer. One reason can be the rise of unemployment which will be discussed later. Another reason may be people’s uncertainty as to the future value of their currency because of the financial crisis making them unwilling to spend and more eager to save thus withdrawing their money from the circular flow of the economy. In regards to why companies have stopped spending in the Netherlands it can be explained by emphasizing the interconnectedness between households and companies in a nation’s economy. Figure 1 illustrates the relationship between households and companies. If there is austerity in spending form households there is a negative effect on the companies’ willingness to produce goods and services, thus aggregate supply is reduced which also reduces the companies’ expenditure on factors for production. Lastly, the Dutch government has also cut back its spending from 2011 and made adjustments to the national budget which means that there was reduction of injections into the economy. Overall it can be deducted that the four primary factors which drive the GDP growth rate (investment, government expenditure, consumption, exports) have taken a beating due to the ongoing financial crisis and the physiological effect that it had on Dutch citizens causing the negative impact on the circular flow between households and firms in the national economy (Kaidusch, P. Ott, C. 2012). Unemployment Rate When speaking about the unemployment rate of a nation it is important to understand how such a rate is derived. There are two essential components needed to calculate the unemployment rate, the first being the number of people that comprise the labor force. Labor force is the number of those people in the country that are employed, either in someone else’s business or their own business, plus the number of those people that are unemployed excluding fulltime students, retirees, homemakers and those incapable of working due to disability or health issues. The labor force is divided by the number of those unemployed and then converted into percentage equaling the unemployment rate (Mankiw 2008). Netherlands Unemployment Rate: January 2008 – January 2012 When looking above at unemployment chart for the Netherlands covering the same period as the GDP it appears that following the start of the recession in 2008 the unemployment rate went upwards (negative increase) starting to slowly rise in the second half of 2008 and shooting up from 3. 6 percent in January 2009 up to 4. in the first quarter of the same year. If we refer back to the GDP chart we can see that exactly at this point of time the Dutch economy experienced its first serious plunge in the GDP rate going from 0 percent down to 1. 1 percent. When further following the trend of the unemployment rate it is relatively easy to spot that it is closely related to the GDP rate in 2009. Basically, with the contraction in the GDP it is the natural order of things that unemployment rises since as explained before companies are spending less for factors of production, i. . less workers are needed. However, if we compare the general unemployment rates for the entire euro area (see chart on the next page) we can see that the Netherlands are actually a lot better off than a large portion of the other European countries that share the same currency with general unemployment rate being above 7. 2 percent since 2008 and reaching 10. 4 percent at the end of 2011. Through this we can deduct that the rises in the unemployment rate in the Dutch economy have been of slighter significance if compared on a larger scale. The question maybe posted as to why the Netherlands employment rate suffered much less than other euro area countries. There are a number of answers but only a few deemed essential will be stated in this report. First, when the financial crisis reached the Dutch economy in 2008 a lot of companies collected and kept their workforce fearing a future shortage; however this was only possible at the price of productivity due to the law of diminishing returns on factors of production. This means that the companies were overstaffed leading to a lot of workers being less productive yet still employed. Second, government expenditure was relatively large with high employment in the public sector up to 2011, when the Dutch austerity measure came into effect. Third, in 2009 the government took certain measures to extenuate the damage of the financial crisis on the unemployment rate by introducing relief programs and subsidies. Lastly, what contributed to the unemployment rate stabilizing sooner than expected in the first recession is that there was and still is a rising number of self-employed individuals in professional services, arts, and creative industries. These people adjusted their prices to the fall in demand easier than large scale businesses and managed to stay in business proving how important SME (Small-medium enterprises) are to the economy. However, now it can be observed that the unemployment rate is rising again due to a new recession that started in 2011. Companies in the Netherlands are adjusting their workforce to the demand in the economy leading to higher unemployment supporting the economic theory all factors of production are variable in the long-run. Government expenditure has decreased cutting jobs in the public sector also causing higher unemployment. It would appear that exactly those things that have contributed to the Dutch economy staying under the general euro area unemployment rate have been cut and reduced in the pursuit of creating a more efficient and effective economy (Janssen 2011). Inflation Rate _ Inflation in macroeconomic terms is the general rise in price of good and services in a given economy and is closely related to the value of money. Inflation occurs when there is an access of money being pumped into the economy usually causing a rise in demand and subsequently a rise in price. The inflation rate in a country is the percentage of monetary value by which prices have risen in general. It is measured from one year to the next. Inflation causes the purchasing power of money to decrease meaning that that consumers can purchase less goods and services with the same particular sum of money then before inflation has happened, in simple terms inflation causes money to lose it value (Mankiw 2008). The main reason as to why inflation is negative for the economy is because it can have the effect of frightening people from spending money and herd their saving in banks and even worse out of banks causing a complete withdraw of their capital from the economy. Netherlands Inflation Rates: January 2008 – January 2012 When examining the inflation chart for the Netherlands for the period between 2008 to the start of 2012 it can be observed that the inflation rate decreased just about when the global recession hit the Dutch economy. Throughout the recessive period the inflation rate continued to decrease with very little fluctuation up to the point in 2009 when the economy was recovering from the recession. From that point there was a steady rise again in the inflation rate until the new recession took place in mid-2011 with a declining trend passing over into 2012. Reasons as to why the Netherlands were experiencing a decrease in the inflation rate can be explained as follows. A very base explanation is that there was less money circulating in the Dutch economy which brought about the increase of value in the available oney supply, however there is more to the story. Since the Netherlands are part of the European Union it is not the responsibility of the Dutch Central Bank to regulate policies regarding inflation but that of The European Central Bank. Following the global meltdown of the financial system on a global scale in 2008, the European Central Bank under the presidency of Jean-Claude Trichet did not fol low the action of the Federal Reserve in the United States and the Bank of England in the UK by cutting its interest rates which have a definitive impact on inflation. What happens is that when interest rates are cut people tend to borrow more money which results in more money circulating in the economy. â€Å"Inflation is an autonomous occurrence that is impacted by money supply in an economy. Central governments use the interest rate to control money supply and, consequently, the inflation rate. When interest rates are high, it becomes more expensive to borrow money and savings become attractive. When interest rates are low, banks are able to lend more, resulting in an increased supply of money. –Economy Watch 2010 This is a viable explanation as to why Inflation rates started to decrease during the recession in the Netherlands who followed a very similar inflation rate trend as all the countries in the euro area during that period, as illustrated in the chart below. As the Dutch government took measures to reduce the damage to the unemployment rate by giving subsidies and relief programs the money supply in the economy started going up a gain, people started spending more and the inflation rate began to steadily rise again as shown on the chart for the Netherlands inflation rate, see previous page. By following this logic it is easy to deduce why inflation rates are now rising again, due to the austerity program that the government brought into effect in 2011 cuts have been made to the spending budget once omre reducing the money supply in the economy. The Relation between Unemployment and Inflation Up to this point in the report we have observed that there is a connection between GDP and the unemployment rate. When GDP is down overall productivity and demand is down in the economy which causes less demand for work force that is a direct factor of production. Thus we could follow what was happening in the Dutch economy when the recession (negative GDP for two quarters of a year) took effect and why unemployment did rise. Further on, the relation between unemployment and inflation will be examined. In the long-run it can be observed that unemployment and inflation are not connected since they have different determents in the long-run. For the unemployment rate some long-run determinants are minimum wage laws, power of labor unions, and how effective job searching is. The main factor that determines the inflation rate in the long-run is the growth in the money supply (Mankiw 2008). However, in the short-run the two are relevant to each other and to policy makers in the government. In the short-run there is an economic trade-off between inflation and unemployment putting governments in difficult positions. Do they pump subsidies and other monetary aid into the economy and through this increase the aggregate demand in the economy subsequently increasing inflation and decreasing the unemployment rate, or, do they make cuts in spending contracting aggregate demand and thus contribute to the increase to the unemployment rate yet keeping the inflation rate down. The best way to illustrate this trade of is through the Philips curve shown below. A lot could be said on the topic of the Philips curve and its application in macroeconomic theory on the relationship between unemployment and inflation and for this it is recommended that the works of George Akerlof and the research done by Samuelson and Solow should be further referred to. Getting back to the Netherlands it is obvious that Dutch policy makers were faced with exactly this dilemma even more so during the recession of 2008 and 2009. As the government subsidized and lend aid in the economy the unemployment rate seemed to stay at a reasonable unemployment level further aided by the European Central Bank’s inaction in decreasing the interest rates as mentioned earlier in the report. However, as the government starting making cuts and companies readjusted their work force inflation rates contracted unemployment rates rose for the year of 2011. Conclusion When it comes to the GDP growth of the Netherlands it can be concluded that it’s going to take some extensive time for the economy to recover from the damage done by the financial crisis. Of course there is much more that could have been said on the topic of GDP however those issues will be left as the topic of another report of a deeper analytical nature. As to the unemployment rates in the Netherlands even though they have been relatively low in comparison to other countries they are on the rise and forecasts by the Dutch treasury agency have been negative describing that the Dutch government has a hefty challenge ahead of itself in the next couple of years stabilizing the lasting effects of the recession, past and present. In regards to the inflation rates they are currently on the decline and may very well stay that way for the upcoming year since another shallow recession is forecasted for the first two quarters of 2012. In the course of this report it was made evident to me as to how interrelated GDP, unemployment, and inflation are in reality. Furthermore, now there is a clear understanding of what kind of difficult issues policymakers are faced with in the process of regulating this phenomenon called economy. Bibliography 1. Business Dictionary. com (2012), Law of diminishing returns, available at: http://www. businessdictionary. com/definition/law-of-diminishing-returns. html (accessed on April 29, 2012) 2. Countries of the World (2012), Netherlands Economy 2012, available at: http://www. theodora. com/wfbcurrent/netherlands/netherlands_economy. html (accessed on April 28, 2012) 3. Dutch State Treasury (2011) Ministry of finance: Outlook, available at: http://www. dsta. nl/dsresource? objectid=7528type=org (accessed on April 29, 2012) 4. Economy watch (2010) Inflation And Interest Rate, available at: http://www. economywatch. com/inflation/economy/interest-rates. html (accessed on April 29, 2012) 5. Encyclopedia of Nations (2012), The Netherlands – Overview of economy, available at: http://www. nationsencyclopedia. com/economies/Europe/The-Netherlands-OVERVIEW-OF-ECONOMY. html (accessed on April 28, 2012) 6. Kaidusch, P. Ott, C. (2012), Recession in the Netherlands: is the core turning to periphery? , available at: http://cib. natixis. com/flushdoc. aspx? id=62676 (accessed on April 28, 2012) 7. Mankiw, G. (2008), Principles of Macroeconomics, 6th edition, Ohio: SW Cengage Learning 8. Mike Moffatt How to cite Economic Analyses – Netherlands, Essay examples

Economic Analyses †Netherlands Free Essays

Netherlands National Economy: 2008-2012 Compulsory Assignment April 24 2012 Spur: MM 2nd Sem. Subject: Descriptive Economics Table of contents _ Introduction†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. We will write a custom essay sample on Economic Analyses – Netherlands or any similar topic only for you Order Now . †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦2 GDP†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 3 Unemployment Rate†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦ 6 Inflation Rate†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦9 Conclusion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦. 12 Bibliography†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. †¦Ã¢â ‚¬ ¦Ã¢â‚¬ ¦13 Introduction _ This report is written for the purpose of the completion of a compulsory assignment that was allotted to the second semester students of the Marketing and Management spur. The theory and data that is described herein is related to the subject of descriptive of economics which is a branch of macroeconomic studies. The specifics of the assignment are, according to my understanding, to find a national economy of our choice; analyze the nation’s recent economic growth rate known as GDP (Gross Domestic Product); analyze the inflation rate; analyze the unemployment rate; present visual data to support the written information; explain in advance what GDP, inflation and unemployment is from the definitive perspective. The national economy that I have chosen to analyze is that of the Netherlands. The reason that I have specifically chosen this economy is twofold. Firstly, the Dutch economy it is one of many economies within the European Union that is having difficulties recovering from the global financial crisis of 2008/9 and the current crisis that is further evolving in the European Union, more specific insight to this developing may prove beneficial in the post-graduation period when exploring possible job opportunities. Secondly, the NGO Spark that is channeling capital into International Business College Mitrovica is located in Amsterdam, Netherlands; therefore it is interesting to know what economic environment the organization is surrounded by. Dutch Economy The Netherlands have a long history of trading with other countries in the world and have throughout time become very dependent on trade. The Dutch economy is based on a free market economy system with the government’s main purpose being to set regulations and taxations in the economy. Furthermore, the Netherlands are part of the European Union and have closely bound their economy to the EU by joining the European Monetary Union, that is to say the euro. The Dutch are advocators of free international trade and the reduction and removal of tariffs since it is obvious that they would benefit from more free trade. Past expansions of the Dutch economy were mainly due to an emphasis being put on increasing foreign trade, consumer spending and investment. When compare to other economies the Netherlands rank as the fifth largest economy in Europe with relatively stable industrial relations. When it comes to industrial activities, Netherlands are primarily occupied with food processing. The country is highly technologically advanced when it comes to agricultural development and uses a relatively small labor force to regulate agricultural cultivation. Currently it holds an estimated population of 17 million people. Average unemployment rate in the country is 4. 77 percent; average inflation rate is 2. 08 percent; average GDP growth rate is 0. 61 percent per quarter. Gross Domestic Product (GDP) GDP is the sum in market value of all goods and services (products) that a country has produced in a given span of time, i. e. a year or a quarter of a year multiplied by four. It is a statistical measurement expressed in monetary value. In order to get a comprehensive value of goods and services the prices of those products are added together to get the GDP value. This is only relative to final products and not intermediates such as components that are used to produce the final good or service with the exception of those products that are produced and then stored in inventory; those have momentary or short GDP value. The term â€Å"all goods and services† applies only to the country’s output that is legitimate and legal excluding all products derived from illegal activity and those products that are produced and consumed in a household, i. e. homegrown vegetables used only for personal consumption. Other products that are not included into the GDP are those that are not newly produced and sold, this applies to used goods such as cars or machinery. GDP is not concerned with nationality, e. g. if an individual of American nationality opens a company in the Netherlands producing a particular product and sells it in the Netherlands, that is also counted into Netherlands GDP. There is a clear line between GDP and a GDP growth rate. The GDP growth rate is expressed as a percentage and it uses the Real GDP (GDP or Nominal GDP minus inflation or increases in price). It shows by what rate (percentage) the economy as a whole has expanded or contracted from one period to another period (Mankiw 2008). GDP Netherlands: January 2008 – January 2012 When analyzing the Dutch economy at the peak of the global financial crisis (2009) it is apparent that the Netherlands were affected very deeply (illustrated in the graph above and on the next page). The economy was in a heavy recessive state meaning that the national economy was experiencing a contraction in economic growth or simply put, the national economy was shrinking. The recession or negative growth started in 2008 for the Netherlands dropping from a positive economic growth rate of 0. 5 percent in the first quarter to -0. 4 percent in the second quarter of the year. This recession was by far the worse that the Dutch economy has ever experienced reaching a record low of -2. 2 percent at the end of the first quarter in 2009. The recession was in effect up to mid-2009 with the economy starting to experience positive growth again in the third quarter (0. 8 percent) of the same year. From that point Netherlands GDP was subject to fluctuation in growth rate, however staying well on the positive side of growth all the way up to mid-2011 where the economy experienced another plunge and fell to -0. 4 and -0. 6 percent in the third and fourth quarter of the year. The reasons for the recession in 2008 and 2009 are not of an ambiguous nature. The world as a whole had entered a recession primarily driven by the financial disaster created by the banks in the United States. People all over the world had stopped spending money which led to companies reducing trade and production. These developments had a negative impact on the Dutch economy which receives a large portion of its GDP from trading with other national economies. In addition to the negative turn in trade during the recession the Netherlands also experienced a reduction in traffic in its harbors which serve as a center for European transport and contraction to internal spending form companies and households. When examining the more recent recession beginning in 2011 a number of factors were uncovered in relation to the cause of contraction in economic growth. Again the external environment has had a tremendous effect on the Dutch economy this time sparked by the financial crisis that has been unfolding in the European Union. Starting with ongoing financial and economic breakdown of Greece and more recently Spain and Ireland, the Netherlands have been greatly affected by those countries inability to pay off their debts. This has led to a reduction in trade again for the Dutch primarily because the risk that is now associated with the European Union and its lack in competency in regulating the financial crisis. Further on, internal demand and expenditure has again decreased from households and companies. As to why households have stop spending money there is no single answer. One reason can be the rise of unemployment which will be discussed later. Another reason may be people’s uncertainty as to the future value of their currency because of the financial crisis making them unwilling to spend and more eager to save thus withdrawing their money from the circular flow of the economy. In regards to why companies have stopped spending in the Netherlands it can be explained by emphasizing the interconnectedness between households and companies in a nation’s economy. Figure 1 illustrates the relationship between households and companies. If there is austerity in spending form households there is a negative effect on the companies’ willingness to produce goods and services, thus aggregate supply is reduced which also reduces the companies’ expenditure on factors for production. Lastly, the Dutch government has also cut back its spending from 2011 and made adjustments to the national budget which means that there was reduction of injections into the economy. Overall it can be deducted that the four primary factors which drive the GDP growth rate (investment, government expenditure, consumption, exports) have taken a beating due to the ongoing financial crisis and the physiological effect that it had on Dutch citizens causing the negative impact on the circular flow between households and firms in the national economy (Kaidusch, P. Ott, C. 2012). Unemployment Rate When speaking about the unemployment rate of a nation it is important to understand how such a rate is derived. There are two essential components needed to calculate the unemployment rate, the first being the number of people that comprise the labor force. Labor force is the number of those people in the country that are employed, either in someone else’s business or their own business, plus the number of those people that are unemployed excluding fulltime students, retirees, homemakers and those incapable of working due to disability or health issues. The labor force is divided by the number of those unemployed and then converted into percentage equaling the unemployment rate (Mankiw 2008). Netherlands Unemployment Rate: January 2008 – January 2012 When looking above at unemployment chart for the Netherlands covering the same period as the GDP it appears that following the start of the recession in 2008 the unemployment rate went upwards (negative increase) starting to slowly rise in the second half of 2008 and shooting up from 3. 6 percent in January 2009 up to 4. in the first quarter of the same year. If we refer back to the GDP chart we can see that exactly at this point of time the Dutch economy experienced its first serious plunge in the GDP rate going from 0 percent down to 1. 1 percent. When further following the trend of the unemployment rate it is relatively easy to spot that it is closely related to the GDP rate in 2009. Basically, with the contraction in the GDP it is the natural order of things that unemployment rises since as explained before companies are spending less for factors of production, i. . less workers are needed. However, if we compare the general unemployment rates for the entire euro area (see chart on the next page) we can see that the Netherlands are actually a lot better off than a large portion of the other European countries that share the same currency with general unemployment rate being above 7. 2 percent since 2008 and reaching 10. 4 percent at the end of 2011. Through this we can deduct that the rises in the unemployment rate in the Dutch economy have been of slighter significance if compared on a larger scale. The question maybe posted as to why the Netherlands employment rate suffered much less than other euro area countries. There are a number of answers but only a few deemed essential will be stated in this report. First, when the financial crisis reached the Dutch economy in 2008 a lot of companies collected and kept their workforce fearing a future shortage; however this was only possible at the price of productivity due to the law of diminishing returns on factors of production. This means that the companies were overstaffed leading to a lot of workers being less productive yet still employed. Second, government expenditure was relatively large with high employment in the public sector up to 2011, when the Dutch austerity measure came into effect. Third, in 2009 the government took certain measures to extenuate the damage of the financial crisis on the unemployment rate by introducing relief programs and subsidies. Lastly, what contributed to the unemployment rate stabilizing sooner than expected in the first recession is that there was and still is a rising number of self-employed individuals in professional services, arts, and creative industries. These people adjusted their prices to the fall in demand easier than large scale businesses and managed to stay in business proving how important SME (Small-medium enterprises) are to the economy. However, now it can be observed that the unemployment rate is rising again due to a new recession that started in 2011. Companies in the Netherlands are adjusting their workforce to the demand in the economy leading to higher unemployment supporting the economic theory all factors of production are variable in the long-run. Government expenditure has decreased cutting jobs in the public sector also causing higher unemployment. It would appear that exactly those things that have contributed to the Dutch economy staying under the general euro area unemployment rate have been cut and reduced in the pursuit of creating a more efficient and effective economy (Janssen 2011). Inflation Rate _ Inflation in macroeconomic terms is the general rise in price of good and services in a given economy and is closely related to the value of money. Inflation occurs when there is an access of money being pumped into the economy usually causing a rise in demand and subsequently a rise in price. The inflation rate in a country is the percentage of monetary value by which prices have risen in general. It is measured from one year to the next. Inflation causes the purchasing power of money to decrease meaning that that consumers can purchase less goods and services with the same particular sum of money then before inflation has happened, in simple terms inflation causes money to lose it value (Mankiw 2008). The main reason as to why inflation is negative for the economy is because it can have the effect of frightening people from spending money and herd their saving in banks and even worse out of banks causing a complete withdraw of their capital from the economy. Netherlands Inflation Rates: January 2008 – January 2012 When examining the inflation chart for the Netherlands for the period between 2008 to the start of 2012 it can be observed that the inflation rate decreased just about when the global recession hit the Dutch economy. Throughout the recessive period the inflation rate continued to decrease with very little fluctuation up to the point in 2009 when the economy was recovering from the recession. From that point there was a steady rise again in the inflation rate until the new recession took place in mid-2011 with a declining trend passing over into 2012. Reasons as to why the Netherlands were experiencing a decrease in the inflation rate can be explained as follows. A very base explanation is that there was less money circulating in the Dutch economy which brought about the increase of value in the available oney supply, however there is more to the story. Since the Netherlands are part of the European Union it is not the responsibility of the Dutch Central Bank to regulate policies regarding inflation but that of The European Central Bank. Following the global meltdown of the financial system on a global scale in 2008, the European Central Bank under the presidency of Jean-Claude Trichet did not fol low the action of the Federal Reserve in the United States and the Bank of England in the UK by cutting its interest rates which have a definitive impact on inflation. What happens is that when interest rates are cut people tend to borrow more money which results in more money circulating in the economy. â€Å"Inflation is an autonomous occurrence that is impacted by money supply in an economy. Central governments use the interest rate to control money supply and, consequently, the inflation rate. When interest rates are high, it becomes more expensive to borrow money and savings become attractive. When interest rates are low, banks are able to lend more, resulting in an increased supply of money. –Economy Watch 2010 This is a viable explanation as to why Inflation rates started to decrease during the recession in the Netherlands who followed a very similar inflation rate trend as all the countries in the euro area during that period, as illustrated in the chart below. As the Dutch government took measures to reduce the damage to the unemployment rate by giving subsidies and relief programs the money supply in the economy started going up a gain, people started spending more and the inflation rate began to steadily rise again as shown on the chart for the Netherlands inflation rate, see previous page. By following this logic it is easy to deduce why inflation rates are now rising again, due to the austerity program that the government brought into effect in 2011 cuts have been made to the spending budget once omre reducing the money supply in the economy. The Relation between Unemployment and Inflation Up to this point in the report we have observed that there is a connection between GDP and the unemployment rate. When GDP is down overall productivity and demand is down in the economy which causes less demand for work force that is a direct factor of production. Thus we could follow what was happening in the Dutch economy when the recession (negative GDP for two quarters of a year) took effect and why unemployment did rise. Further on, the relation between unemployment and inflation will be examined. In the long-run it can be observed that unemployment and inflation are not connected since they have different determents in the long-run. For the unemployment rate some long-run determinants are minimum wage laws, power of labor unions, and how effective job searching is. The main factor that determines the inflation rate in the long-run is the growth in the money supply (Mankiw 2008). However, in the short-run the two are relevant to each other and to policy makers in the government. In the short-run there is an economic trade-off between inflation and unemployment putting governments in difficult positions. Do they pump subsidies and other monetary aid into the economy and through this increase the aggregate demand in the economy subsequently increasing inflation and decreasing the unemployment rate, or, do they make cuts in spending contracting aggregate demand and thus contribute to the increase to the unemployment rate yet keeping the inflation rate down. The best way to illustrate this trade of is through the Philips curve shown below. A lot could be said on the topic of the Philips curve and its application in macroeconomic theory on the relationship between unemployment and inflation and for this it is recommended that the works of George Akerlof and the research done by Samuelson and Solow should be further referred to. Getting back to the Netherlands it is obvious that Dutch policy makers were faced with exactly this dilemma even more so during the recession of 2008 and 2009. As the government subsidized and lend aid in the economy the unemployment rate seemed to stay at a reasonable unemployment level further aided by the European Central Bank’s inaction in decreasing the interest rates as mentioned earlier in the report. However, as the government starting making cuts and companies readjusted their work force inflation rates contracted unemployment rates rose for the year of 2011. Conclusion When it comes to the GDP growth of the Netherlands it can be concluded that it’s going to take some extensive time for the economy to recover from the damage done by the financial crisis. Of course there is much more that could have been said on the topic of GDP however those issues will be left as the topic of another report of a deeper analytical nature. As to the unemployment rates in the Netherlands even though they have been relatively low in comparison to other countries they are on the rise and forecasts by the Dutch treasury agency have been negative describing that the Dutch government has a hefty challenge ahead of itself in the next couple of years stabilizing the lasting effects of the recession, past and present. In regards to the inflation rates they are currently on the decline and may very well stay that way for the upcoming year since another shallow recession is forecasted for the first two quarters of 2012. In the course of this report it was made evident to me as to how interrelated GDP, unemployment, and inflation are in reality. Furthermore, now there is a clear understanding of what kind of difficult issues policymakers are faced with in the process of regulating this phenomenon called economy. Bibliography 1. 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