Caselet on Devaluation - 630 Words

aseltTechno Consultants and the Inflation in Utopia !!! Utopia is a hypothetical economy situated in Africa. For long Utopia was under military rule. Recently there was a people’s rebellion which overthrew the military despot and established a popular government through the first democratic elections in the history of the country. The Government and the central bank of the country, The Central Bank of Utopia had an immediate problem to tackle. The country was facing a hitherto unprecedented high rate of inflation [of around 15%], which was believed to be largely attributed to excessive liquidity in the economy owing to booming private investment in the real estate sector of the country. The Government wanted The Central Bank to†¦show more content†¦Ã¢â‚¬Å"Despite being under the tyranny of a military government, the country’s macroeconomic fundamentals were good. GDP has been growing at an average of 4-5% per annum since the last 5 years. Both industry and manufacturing sectors has been recording consistent growth. Unemployment rate has been below 5%. The country has a dynamic export sector and exports contributed about 18% of the GDP. [Exports largely consisted of agricultural products, raw materials for textile industry amp; arts and handicrafts].The country depended exclusively on imports fo r its energy and fuel requirements, largely petroleum and diesel. Petroleum and diesel contributed 60% of the total import bill. Utopia has been a favored destination for FDI because of its natural and locational advantages in many metallurgical and mining industries. It also had a booming real estate and tourist sector which were also hot destinations for foreign investment. But now inflation was playing havoc in the minds of the public, the domestic business community, the exporters and importers, the foreign investors and the policy makers who for the first time were getting the freedom and opportunity to express their woes and concerns fearlessly to a government they had elected to power†. Jones wanted Kumar to send by reply mail a gist of the recommendations as a solution to the following questions. How should The Central bank tackle the inflationary situation? What are the measure(s) it should adopt?Show MoreRelatedInternational Business Study Guide7932 Words   |  32 Pagesenforcements XV. Examples of Trade Dispute Issues: A. Genetically modified foods B. Aircraft C. Subsidies for cotton and sugar D. Tax advantages E. We will look at some short cases in discussion section this week. Please read the â€Å"caselets† posted on the course website February 8, 2012 Balance of Payment and Foreign Direct Website I. What are Balance of Payments? A. The Balance of Payments (BOP) accounts for a country’s international transactions for a period of time, typically