Impact Of Quantitative Easing On The Uk Economy Economics Essay

Impact Of Quantitative Easing On The Uk Economy Economics Essay This research proposal focuses on the concept and practice of Quantitative easing in context of UKs economy. The literature consists of elaboration of the need of using Quantitative easing to save Britain economy from recent global economic crises. It further explains the impact as well and covers all major areas which can have its effect. Economic downturn leads to apply the Quantitative easing which can be done through asset purchasing, lowering the interest rate and most importantly injecting cash directly into the economy. Recently world has suffered global economic recession which forced almost every country to take appropriate measures such as supplying more money into the economy. The recession badly effected UKs economy among all. Monetary Policy Committee adopted Quantitative easing measures under the authority of Bank of England in order to stabilize the economy and save UKs economy from the economic crisis. It is the role of Bank of England to maintain the stability of UK financial system and its economy. In the recent economic recession the new banking act has increased the powers of Bank of England which have authority to bank financial services and the market to actually deal with this stress situation. Monetary Policy Committee decreases the bank rate to 0.5%. In January 2008 the bank rate was 5.50% which continue to fluctuate and finally in 2009 it started with 1.50% and ended up as a reduction to 0.5%. (Source: www.bankofengland.co.uk). They are also focusing to have a low and stable inflation in order to do that a target has been set to keep inflation at 2% by the UK Government. Lowering the bank rate will take time to keep inflation in control. So there is a need to look ahead and decide an appropriate monetary policy. This leads Bank of England to decide purchasing of assets such as Government and corporate bonds so that the money supply will increase or they will purchase assets from private sector such as insurance companies or non-financial companies by crediting their account. Money can be in two forms either cash or bank deposits so in other words the focus in this policy will be to increase reserves of banks and the spending which ultimately lead to more flow of money in wider economy. According to Monetary Policy Committee the asset purchase will decrease the issues about liquidity and it will give companies sort of confidence so that they can borrow directly from the capital market. The Committee also defined a measured criteria related to supply of money so that it cannot increase beyond a certain limit and if the inflation target set by the Government will rise then monetary policy will use strict measures such as increasing bank rate or selling back the assets purchased to the market. (Source: Monetary Policy: www.bankofengland.co.uk) Rational of the Research topic: The research on this proposed topic is selected because of my own personal interest in the financial and economic systems especially of UK. The recent recession has affected everyone directly or indirectly the people suffered because of unemployment and low incomes. This actually directed my interest to know about the crises and the measures taken by authorities. It also provoked me to explore and gain comprehensive understanding about Quantitative easing. My previous research proposal during study was related to economic system of Pakistan and the role of State Bank of Pakistan this also initiate my interest in topic . After coming to UK the crises of economy was selling like hot cakes so it forced me to read articles and journals about the crises. This actually gave me an insight about the measures taken by Bank of England. Research Questions: Most importantly this research proposes the examination of a basic question: how successful Quantitative easing is in the stability of UK economy? Apart from this question it actually raises other questions as well such as: How the decrease in bank rate will reduce inflation in UK? What will be the criteria to control supply of money if it increases more than desired target? How will we know if the asset purchases are working? Will the performance of the banks increase? Will it be easy for companies to borrow direct from the market? Research Objectives: The basic objective of this research is to critically evaluate the Quantitative easing and its impact on UK economy. By analyzing of this process the research will intend to gain broad knowledge and insight about different monetary policies implied by Bank of England. How Quantitative easing increase the spending for companies and the flow of money which ultimately leads to a stable economy. Literature Review: The literature provided here is not conclusive because there is more to observe and discover in order to collect and review the literature. The nature of the topic is contemporary and current therefore more literature can be achieved by the passage of time. Norma Cohen (2009) stated that although Monetary Policy Committee has confidence in their Quantitative easing strategy to boost nominal demand but total lending to businesses further decreases. The consumer credit continued to shrink and uncollectable consumer loans increased. The Bank of England reported that the growth of money is on its slowest rate since December 2004. The borrowing also showing seasonal decline the size of this decline is more than expected. So Monetary Policy Committee should put more focus on measuring and increasing growth of money. (Source: www.bankofengland.co.uk) Daniel Pimlott (2009) expressed a view in his article in Financial Times that household disposable income has increased 1.2% in end of December and it has pushed saving ratio to 8.6%. He provides the reason in this rise that Bank of England decided to avoid rise in value added tax which ultimately enable people to save more without affecting the power of spending. He presented a view that such quick rise in saving suggests that UK economy may be closer to stabilize. There are clear signs that economy is improving in Britain due the measures of quantitative easing. The labor market is performing well comparing to the previous quarter and industrial production is rising considering the growth in both manufacturing and services industry because the Bank of England Policy of creating flow of spending and increasing the banks borrowing. (The Economist, November 12th, 2009) Mervyn King (2009) the Governor of Bank of England said in a press conference in November while presenting quarterly inflation report that UK economy facing delays in balance sheet adjustment. In order to rebalance UK economy needs to get away from private and public sector towards exports. The reduction in exchange rates is helping to smooth this process and the substantial reduction in fiscal deficit is quite clear. The Quantitative easing strategy of purchasing assets is proved handy but it is much smaller. Andrew Oxlade (2009) a well-known financial analyst wrote an article Recession Watch. He analyzed the impact of quantitative easing on UK economy and said that although the policy of Spending and Borrowing by the committee is core to get out of the recession but the investment fell and unemployment increases. Inflation is getting a bit high due the increase in oil price. Dr. Ros Altmann (2009) suggested that buying the gilts is not a proper way to ease the recession. Bank of England should emphasis on buying corporate bonds. So operating quantitative easing through buying gilts is not working efficiently. She further presented a view that buying gilts will increase the leak of money into overseas bond markets. But if they put more emphasize on buying corporate bonds then they can get money directly to the companies. Edward Hadas (2009) in his article on Telegraph analyzed that although the loan losses are increased but the aid provided by the Bank of England is massive which include minimal interest rate and sufficient supply of money. This is actually helping the economy to get a way out of recession. The liquidity push has given confidence to the investors in the form of cash to put in the market. Although the GDP was falling but now it has fallen less in few recent months. Economy is declining in a moderate way that suggests that the growth is coming back slowly. This is all due to the measures taken by the authorities such as Bank of England. Richard Taylor (2009) argued that there has been a major increase in business accounts in the banks. The new businesses are being started very quickly and it has exceeded the figures in last year. Richard Blackden (2009) analyzed the Delloitte Warns review and said that figures shows that the economy shrinks than the previous quarter and fears that the economy could go back to the recession. Methodology: The analysis of Quantitative easing and its impact on UK economy is based on further research only through this we can analyze the impact and its nature. There is a need to look through the process in order to evaluate the affect. Thats why the nature of this research proposed exploratory rather explanatory. The theory actually examines the continuity of the process and measures the trends in the market and the economic system of UK. There is also important to adopt qualitative research approach in order to include some focus groups like general population and banks to know the progress and relief. Observation method can be done in order to know the content and statistics about the topic. In order to know the effects of quantitative easing in the economy causal research is also handy so that the effects of different policies implied by Bank of England can be analyzed. A combination of in-depth interviews by financial experts and analysts and method of observation can also be used in order to address the research proposal. Interviews of experts can have structured interview based on specific questions and should include predetermined questions. There is a need to have a clear idea about the topic and should analyze facts and figures published by different financial institutions of UK. Data Collection Methods: While collecting the data through observation method the researcher needs to address the right source for that. The researcher will need to consider and monitor the continuity of the process of quantitative easing and could gather data by different articles and newspapers. The researcher also has to look through the facts and figures on different short periods of times. This can be done by obtaining data from bank of England quarterly report which includes all the figures related to topic. The focus should be on banks performance and overall economy considering the unemployment and inflation and household income. In order to know that quantitative easing is really working there is a need to consider previous quarterly reports as well and then do a comparison. This will help to simply and precise the data collection and the data collected by this will be valid as well. Moreover in-depth interviews can be done through telephones or meeting directly to financial experts to gather their opinions. Telephones interviews should be recorded on tape and while conducting direct interviews the important points should be noted down on paper. In such data collection method, interviewee is given the opportunity to talk freely about the topic. The interviews duration should not be more than half an hour for utilizing time a set of questions should be prepared prior to the interviews. Analysis of Data: The research consists of in-depth interviews as well as considering the observations and obtaining the facts and figure in the analysis. That is why the research purposes both quantitative and qualitative methods of data analysis. Obtaining the facts and figures through observation will require managing the data and then statistical analysis. This can be done through using the Microsoft Excel spread sheet which can show graphical presentation of the data as well. In-depth interviews of experts will include qualitative approach based on the theory purposed by Miles and Huberman (1994) consists of components, procedures and outcomes. Components will include gathering data then its reduction and verification procedures include the coding, categorization, comparison and interpretation and outcomes gives explanation and description of the results. Resource Requirement: The most of the literature review will be obtained from newspaper articles and television news and press conferences. The fieldwork will include extensive use of internet facilities and also telephone. The interviews will include telephonic and direct meeting depending on interviewee convenience and preference. The topic of research is actually contemporary issue thats why newspaper reading is essential on regular basis. As there is need to conduct the interviews of financial experts so the researcher need to organize visit to some large banks such as Lloyds and Barclays. The visit can be to the head offices of these banks or to the main branches where the researcher can interview any senior correspondent of the bank. There is a need to get appointment prior to the visit. Gantt chart: (Week Commencing 18 January, 2010) Activity Jan-10 Feb-10 Mar-10 Apr-10 May-10 w/k commencing 18 25 1 8 15 22 8 15 22 29 5 12 19 26 3 10 17 24 Read literature ÃÆ'- ÃÆ'- Objective ÃÆ'- ÃÆ'- Proposal ÃÆ'- ÃÆ'- Strategy Method ÃÆ'- ÃÆ'- Collection of Articles ÃÆ'- ÃÆ'- ÃÆ'- ÃÆ'- ÃÆ'- ÃÆ'- ÃÆ'- Develop Questions for interview ÃÆ'- Taking appointment ÃÆ'- Interview to Lloyds, Barclays financial Analysts ÃÆ'- Comparison ÃÆ'- Gather data ÃÆ'- Analyze data ÃÆ'- Update literature ÃÆ'- ÃÆ'- Finalize data ÃÆ'- Draft to supervisor ÃÆ'- Revise draft ÃÆ'- Print Bind ÃÆ'- Submission ÃÆ'-

Transatlantic Airlines Report

We have analyzed the existing booking policy of TransAtlantic Airlines and identified potential cost saving.The implementation of the suggested new booking policy would lead to reduction of total expected costs per flight on average by  £8,100.Furthermore, the new policy would increase the predictability of total costs per flight. With 90% confidence new costs will be in a range  £750 and  £4,800 as compared to the current range of  £1,900 to  £20,300. The comparative description of the policies is presented in table 1.Analysis of existing policy quick fixBase case modelThe foundation of current policy is based on the analysis in table 1. We observe that the total costs for both classes are  £6,250. The analysis of existing model indicates that there are two controllable variables in yellow (booking level in both classes) and two uncontrollable variables in green (no-show %).Table Foundation of existing policyThe available data indicates that current policy assumes some e mpty seats on the plane. As there is no immediate justification to this assumption, overbooking of the plane should be targeted to minimize the costs.Table Quick policy fix By increasing the booking level for both classes,  £0 costs can be achieved (table 2).Scenario analysisTransAtlantic does not have data retention policy in place. Hence, TransAtlantic has applied the consensus of experts for the scenario analysis. The percentage of no-shows varies between 3% and 8% in economy class and 15%-30% in business.Our calculations indicate that base case scenario is equal to the best case scenario. The main reason is that both cases of over- and under booking the company incurs costs, therefore the cost minimization is only achieved when the number of passengers in each class taking the flight is equal to the corresponding capacities (table 1).In the worst case scenario, we assume the maximum no-show in both classes. The data in table 3 demonstrates that the cost of the missed opportuni ties (e.g. missed fare) is much higher than the passenger compensation costsWe have calculated that in the worst case the company can experience the loss of revenues of  £23,250 per flight.Table Worst case scenarioSensitivity analysisWe have identified that there are two independent uncontrollable variables in our model. The best way to quantify the uncertainty without the simulation is to conduct a sensitivity analysis.One-way sensitivity analysis allows identifying the influence of each variable on the total costs.Expectedly, we observe that zero-cost for economy class happens at 5% of no-show and for business class is 20%, as these levels are equal to full capacity utilization in each class.Any deviation from these levels results in the increased costs for the company. For the economy class the increase of no-shows by 1% point results in the loss of  £1,800, while a decrease of 1% point results in the loss of  £600. In business the corresponding figures are  £1,450 and  £300 (figure 1).In relative terms, the costs of 1% increase are 3 times and ~5 times higher than the costs of 1% decrease in no-shows for economy and business class correspondingly. The observation leads us to conclude that overbooking is a viable option for the airline. Analysis of two way sensitivity (Appendix A), helps us to identify the sweet spot of costs of no-shows (colored green).SimulationPolicy comparisonIn the simulation analysis we assumed triangular probability of no-shows based on the available data (economy: between 3%-8%, most people 5%; business: between 15%-30%, most common 20%). We have also used 5,000 iterations to calculate final results. Table 5 summarizes the results.Table Simulation output analysisAccording to our analysis the mean of the current policy equals  £10,800. This value is different from  £6,250 as the new estimated mean represents the expected value, which are the average costs weighted by their respective probabilities. The previous estimati on indicates solely the costs at one point.Quick look at the summary table helps us identify that the proposed quick fix is the least value destructing policy out of three policies. It has the lowest mean of total costs, the lowest probability of exceeding  £10,000 as well as the narrowest range of the cost.To be more assured, we have additionally conducted probability dominance analysis (figure 2), which tells that both current and quick fix policy have deterministic dominance (always better) then no overbooking policy (green line). Whereas the quick fix (blue line) has stochastic dominance over currently employed policy (red line). The outcome of current policy maybe occasionally better than our proposed solution, but in the majority of cases the quick fix policy will be better.Figure 2 Probability dominance analysisPolicy optimizationIn order to identify the optimal booking policy we have conducted simulation with 40 different booking levels for business and economy. As these t wo variables are independent, we have conducted consequential analysis. Results for business class level booking are in (figure 3). The detailed information about tested values is in Appendix B.Figure 3 Optimal booking policyWe have observed that the lowest expected value of total costs is achieved at 427 and 133 accepted reservations for economy and business respectively. The comparison of current policy against new policy can be found in table 6.Table Current vs new policy comparisonFurther model improvementsIt has been suggested that passengers upgraded from the economy class to business class, can additionally reduce costs.We have included this condition in the model and run the simulation with different booking levels for business and economy (see section on optimization). Expected booking levels are not affected by this change. No further adjustments to the booking levels are necessary due to overbooking in both classes,Nevertheless, in some instances, as we consider the whole spectrum of possibilities, we observe that there are occasions at which business class is not fully occupied. By introducing upgrade possibility we can indeed improve our overall results as seen from the following summary table 7.Table New policy with upgrade option Even though the improvement to the mean is limited to  £200 and the range adjustments also non-significant, we almost eradicating the chance of incurring costs more than  £10,000.This result ascribes to the partial offsetting of business opportunity costs (fare of  £1,450), with collected fare from economy class passengers of  £450 and the omission of compensation cost of  £150 to economy customers for overbooked flights. Thus, TransAtlantic airlines incurs only the cost of  £850 per business passenger instead of  £1,450 under the circumstance that business class passengers don’t show up and leave seats to extra passengers of economy class.

Effective Management Essay

An effective manager accepts the political nature of organizations. Power tactics are used to translate power bases into specific action, and there are a number of tactics that could be used in various situations. As a manager trying to influence your employees, what tactics would you personally be most likely to use? Why? It is often necessary to have political influence to enable organizational members to achieve their goals, especially if these goals involve some degree of change or innovation. Network is defined by Richard L.  Daft as, â€Å"a system that links together people and departments within or among an organizations for the purpose of sharing information resources. † But, a more common and more subtle form of political behavior involves networking. Networking is when an individual establishes good relations with key organization members and/or key people outside the organization in order to accomplish one’s goals. Something as seemingly trivial as the arrangement of furniture in an office can affect perceptions of another person’s power. One vivid example comes from John Ehrlichman’s book Witness to Power. Ehrlichman described his first visit to J. Edgar Hoover’s office at the Department of Justice. The legendary director of the FBI had long been one of the most powerful men in Washington, DC, and as Ehrlichman’s impressions reveal, Hoover used every opportunity to reinforce that image. Ehrlichman was first led through double doors into a room replete with plaques, citations, trophies, medals, and certificates jamming every wall. He was then led through a second similarly decorated room into a third trophy room, and finally to a large but bare desk backed by several flags and still no J. Edgar Hoover. The guide opened a door behind the desk, and Ehrlichman went into a smaller office, which Hoover dominated from an impressive chair and desk that stood on a dais about six inches high. Erhlichman was instructed to take a seat on a lower couch, and Hoover peered down on Ehrlichman from his own loftier and intimidating place.

Biography of John Lee Love, Black Inventor

John Lee Love (Sept. 26, 1889?–Dec. 26, 1931) was a black inventor who developed the portable pencil sharpener, which he patented in 1897. Not much is known about his life, but he is remembered for two inventions, the other being a plasterers hawk, which works much like an artists palette for a plasterer or mason. In the pantheon of African-American inventors, Love is remembered for devising small things to make life easier. Fast Facts: John Lee Love Known For: Inventor of the Love pencil sharpenerBorn: Sept. 26, 1889? in Fall River, MassachusettsDied: Dec. 26, 1931 Charlotte, North Carolina Early Life John Lee Love is believed to have been born on Sept. 26, 1889, though another account lists his birth year as sometime between 1865 and 1877 during Reconstruction, which would have put his place of birth in the South. Not much else is known about Loves early days, including whether he had any formal schooling or what prompted him to tinker with and improve certain everyday objects. We do know that he worked almost his entire life as a carpenter in Fall River, Massachusetts and that he patented his first invention, an improved plasterers hawk, on July 9, 1895 (U.S. Patent No. 542,419). First Invention The plasterers hawk traditionally had been a flat, square wooden board, about 9 inches long on each side, with a handle—basically, a post-like grip—that is perpendicular to the board and attached to its bottom. By putting the plaster, mortar, or, later, stucco on top of the board, the plasterer or mason could access it quickly and easily with the tool being used to apply it. The new design functioned much like an artists palette. As a carpenter, Love was likely well acquainted with the use of plaster and mortar. He believed that the hawks in use at the time were too bulky to be portable. His innovation was to design a hawk with a detachable handle and a foldable board made of aluminum, which must have been a lot easier to clean than wood. Portable Pencil Sharpener Another of Loves inventions, and one better known than the plasterers hawk, had a much wider impact. It was the simple, portable pencil sharpener, the predecessor of the small plastic device that has been used by schoolchildren, teachers, college students, engineers, accountants, and artists the world over. Prior to the invention of the pencil sharpener, a knife was the most common instrument used to sharpen pencils, which have been around in one form or another since Roman times (although pencils werent mass-produced in a form familiar to us until 1662 in  Nuremberg, Germany). But whittling a point on a pencil was a time-consuming process, and pencils were becoming more and more popular. The solution soon hit the market in the form of the worlds first mechanical pencil sharpener, invented by  Parisian mathematician Bernard Lassimone  on Oct. 20, 1828 (French patent number 2444). Loves reworking of Lassimones device seems intuitive now, but it was revolutionary at the time. Basically, the new model was portable and included a compartment to capture the shavings. The Massachusetts carpenter  applied for a patent for what he called his improved device  in 1897, and it was approved  on Nov. 23, 1897 (U.S. Patent No. 594,114). His design didnt look much like todays portable sharpeners, but it worked by a similar principle. The pencil was inserted into a conical sheath and was moved in a circle, causing the sheath and the blade inside it to rotate around the pencil, sharpening it. Instead of turning the pencil against the blade, as with todays portable sharpeners, the blade was turned against the pencil by the circular motion. Love wrote in his patent application that his sharpener could  also be designed in a more ornate fashion to be used as a desk ornament or paperweight. It eventually became known as the Love Sharpener, and his principle has been in continuous use since he introduced it. Legacy We dont know how many more inventions Love could have given the world. Love  died, along with nine other passengers, on Dec. 26, 1931,  when the car they were riding in collided with a train near Charlotte, North Carolina. But his ideas left the world a more efficient place. Sources John Lee Love  Biography: Inventor. Biography.com.John Lee Love: Inventor of the Portable Pencil Sharpener. KentagePage.com.Pencil Patents: John Lee Love’s Portable Pencil Sharpener. Pencils.com.