IRISH ECONOMY

Irish Economy

Irish Economy

Introduction

Today financial crisis has hit almost every economy people, many of the European states are suffering economic problems. Recession in countries has resulted in number of issues that the government has to deal with. Unemployment and lower demand has created a negative impact on the economy, which has resulted in a decline in economic growth and development. Ireland is one of the European states that has been a victim of it. Many of the developed and advanced countries have been affected by it. However Ireland has been affected the most and it will be challenging for the government to overcome this impact. Almost in every nation today there is a need to have fiscal consolidation and growth enhancing structural reforms to resolve the economic issues and problems. These are required to be developed instantaneously to ensure that the economy is competitive in the global environment (www.economist.com).

The most significant aspect that European central bank tends to cater, and the foremost objective is to maintain price stability in the economy by keeping inflation low and simultaneously avoiding deflation. The key goal of European central bank is to define and implement the monetary policy for the states that lie in the European zone; it also looks after the foreign reserves. The monetary policy of an economy is to develop a policy to control the money supply and interest rates that will have an impact on the economic growth and development. Central banks control the money supply which has an impact on interest rates. Monetary policy of the economy is maintained by taking certain actions that may include increasing or decreasing the interest rate in the economy and affecting the economic growth (www.cpaireland.ie).

Discussion

Government controls the economy by implementing effective monetary policies that are designed by the central banks. It is one of the ways that enables the government to control the economy. As increase in interest rates will decrease consumption since the cost of borrowing will increase therefore as demand will decrease there will be less production of goods and lower output will lead to decrease in economic growth and hence affecting the economy negatively. On the other hand if these interest rates are decreased then this will also lead to a fall in the cost of borrowing and simultaneously it will increase consumption and will motivate producers to increase production and as the production will increase there will increase in economic growth (www.cpaireland.ie).

Monetary policy does not only have an impact over the consumption but also on the investment in the economy as it becomes easier to borrow money at a lower cost businesses will be motivated to invest more and therefore this would increase production and expand the economy, it will also result in creation of employment in the country and will improve the living standards. It is the responsibility of European Central Bank to control these interest rates by controlling the money supply in the economy. money supply and interest rates have a direct relationship ...