National governments and central banks use monetary controls to influence the economy, with combined efforts referred to as international monetary policy. These policies affect trade and can lead to inflation or recession. The IMF can make recommendations and provide loans to distressed nations. The EU and other regional groups also make economic decisions.
National governments and central banks around the world attempt to control elements of the economy such as inflation and interest rates by imposing various types of monetary controls. The combined efforts of these governments and agencies are often referred to as international monetary policy. While each nation has the right to establish its own economic policies, in some cases groups of nations negotiate international monetary policy agreements that affect the economies of multiple countries.
Monetary policies affect the ability of importers and exporters to buy and sell goods with trading partners based in overseas locations. Some countries have minimal natural resources, and people in these countries rely on foreign companies to supply valuable raw materials such as oil and natural gas. High energy prices can start an inflationary cycle and when export prices rise countries often fall into recession. As a result, most national governments make economic decisions that are based on domestic needs but also take into account international monetary policy decisions made in other nations.
Central banks have the ability to lower lending rates, which means that people and businesses can borrow money cheaply and goods become cheaper. During recessions, nations sometimes agree to lower lending rates in unison as part of a unified international monetary policy that will reduce export costs and make trade between nations more affordable. Central banks often agree to raise interest rates in unison during inflationary cycles in order to limit consumer spending and lower prices. Trade disputes often arise when differing economic conditions in two nations cause central governments to make conflicting decisions on monetary policy that make international trade more difficult.
The European Union (EU) is made up of most Western and Central European nations, and the elected officials of each of these nations have the authority to make certain international monetary policy decisions on behalf of the EU. However, individual nations have the right to veto certain political decisions and some countries choose not to participate in EU economic programmes. The United Kingdom and Denmark have agreed to renounce the EU’s political decision to introduce a single European currency. In other parts of the world such as the Americas and parts of Asia, other less formal economic groups made up of various nations sometimes make regional international policy decisions that affect the lives of people in many nations.
Economic decisions are sometimes influenced by the International Monetary Fund (IMF) which is an agency of the United Nations (UN) created in part to facilitate international trade and commerce. The IMF has no official role in policy development, but the entity can make recommendations on policy decisions to UN member countries. Additionally, the IMF operates an emergency cash fund, and economically distressed nations can obtain loans from the IMF if the organization’s policy makers believe the loans will benefit both the nation in question and the global financial scene as a whole. Together.
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