Premium Essay

Macroeconomic Shocks It Sector

In: Business and Management

Submitted By greedywolf
Words 1616
Pages 7
Introduction

IT industry and Globalisation

2008 Financial crisis and Impact on Indian IT sector

Response steps taken by Indian IT firms (HCL, Infosys and TCS)

Conclusion

Introduction

IT industry belongs to the servicing industry in India since India has not grown completely as Indigenous product developers in IT domain. So the growth and performance of Indian IT industry is completely attributed towards the institutions and organisations to which the software solutions or servicing is exported.

It is very tough to comprehend and list out the types of macroeconomic shocks that an IT industry would face. The main reason for this would be IT sector as a whole doesn’t provide its software solutions not just one sector. It provides software solutions to almost all of the sectors like Manufacturing, Retail, Insurance, Banking, and Media, Entertainment so much more and still has scope in so many unexplored domains.

Since the onset of globalisation in the early 90s, large capital influx and the crises that could be attributed with it have become one of the known risks. Large flows of capital into another country has created currency crisis in most of the countries. The most predominant of these shocks was recorded was in the East Asian countries. India never fell prey to these shocks and was effectively insulated from these shocks, until it has opened up its markets for investment by foreign players. The globalization and reforms of 90s despite opening up India’s market and providing employment and growth opportunities to millions, it comes with itself a huge risk of global market crash which incidentally would create a major shock in inflow of the capital into Indian markets.

Capital influx impacts the economy by impacting foreign exchange reserves, this in turn, impact the monetary base when monetary base is impacted the…...

Similar Documents

Premium Essay

Macroeconomics

...Block IV MACROECONOMICS – II UNIT 17 Inflation 1-14 UNIT 18 Banking and Money Supply 15-31 UNIT 19 International Trade and Balance of Payments 32-50 UNIT 20 Economic Indicators 51-62 UNIT 21 Business Cycles 63-71 UNIT 22 Economic Growth, Development and Planning 72-84 Economics for Managers Expert Committee Dr. J. Mahender Reddy Vice Chancellor IFHE (Deemed to be University) Hyderabad Prof. Y. K. Bhushan Vice Chancellor IU, Meghalaya Prof. Loveraj Takru Director, IBS Dehradun IU, Dehradun Course Preparation Team Prof. Ramalingam Meenakshisundaram IFHE (Deemed to be University) Hyderabad Ms. Pushpanjali Mikkilineni IFHE (Deemed to be University) Hyderabad Mr. Pijus Kanti Bhuin IU, Sikkim Ms. Preetaq Dutta Rai IU, Jharkhand Ranchi Prof. S S George Director, ICMR IFHE (Deemed to be University) Hyderabad Dr. O. P. Gupta Vice Chancellor IU, Nagaland Prof. D. S. Rao Director, IBS, Hyderabad IFHE (Deemed to be University) Hyderabad Ms. Hadiya Faheem IFHE (Deemed to be University) Hyderabad Mr. Mrinmoy Bhattacharjee IU, Mizoram Aizawal Prof. Tarak Nath Shah IU, Dehradun Mr. Manoj Kumar De IU, Tripura Agartala © The ICFAI University Press, All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying or otherwise – without prior permission in writing from The ICFAI University Press, Hyderabad. Ref. No. Eco Mgrs SLM – 09...

Words: 28786 - Pages: 116

Premium Essay

International Macroeconomics

... . . . . . . . . . . . 42 2.3.4 The Current Account As the Gap Between National Income and Domestic Absorption . . . . . . . . . . . . 44 2.4 Appendix: Perpetual Trade-Balance and Current-Account Deficits in Infinite-Horizon Economies . . . . . . . . . . . . . 46 51 53 53 62 66 68 70 72 74 75 79 83 87 88 2.5 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 A Theory of Current Account Determination 3.1 A Small Open Economy . . . . . . . . . . . . . . . . . . . . . 3.1.1 3.2 Equilibrium . . . . . . . . . . . . . . . . . . . . . . . . Temporary Versus Permanent Output Shocks . . . . . . . . . 3.2.1 3.2.2 Temporary Output Shocks . . . . . . . . . . . . . . . Permanent Output Shocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 3.4 3.5 3.6 3.7 Terms-of-Trade Shocks World Interest Rate Shocks . . . . . . . . . . . . . . . . . . . An Economy with Logarithmic Preferences . . . . . . . . . . Capital Controls . . . . . . . . . . . . . . . . . . . . . . . . . Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Uncertainty and the Current Account 4.1 The Great Moderation . . . . . . . . . . . . . . . . . . . . . . CONTENTS 4.1.1 The Great Moderation And The Emergence of Trade v Imbalances . . . . . . . . . . . . . . . . . . . . . . . . 90 4.2 A Model With Uncertainty . . . . . . . . . . . . . . . . . . . 91 4.3 The Return of Uncertainty: The Great Contraction And The......

Words: 77395 - Pages: 310

Premium Essay

Macroeconomic Report

...yuiopasdfghjklzxcvbnmqwertyuiopasdfghjklzxcvbnm MACROECONOMICS REPORT | ACKNOWLEDGEMENT * I would like to thank Almighty Allah for providing us with courage, guidance and skill to make this report success. * I would like to thank Sir Khalid Khawar Kazmi for his timely guidance regarding this report. * I would like to thank my group member who helped me to make this report. * I would like to thank my friends for their constant support. DEVISING MONETARY POLICY TABLE OF CONTENT: DEVISING MONETARY POLICY DEFINITION: The regulation of the money supply and interest rates by a Central bank, such as the State bank in Pakistan, in order to control inflation and stabilize currency. Monetary policy is one the two ways the government can impact the economy. By impacting the effective cost of money, the Federal Reserve can affect the amount of money that is spent by consumers and businesses. BRIEF INTRODUCTION: Monetary Policy involves changes in the base rate of interest to influence the rate of growth of aggregate demand, the money supply and ultimately price inflation. Monetarist economists believe that monetary policy is a more powerful weapon than fiscal policy in controlling inflation. Monetary policy also involves changes in the value of the exchange rate since fluctuations in the currency also impact on macroeconomic activity (incomes, output and prices) Changes in......

Words: 4176 - Pages: 17

Premium Essay

Macroeconomics

...100% *21266* Fri, Nov 9, 2001 11:52 AM C H A P T E R The Science of Macroeconomics The whole of science is nothing more than the refinement of everyday thinking. — Albert Einstein 1 O N E 1-1 What Macroeconomists Study Why have some countries experienced rapid growth in incomes over the past century while others stay mired in poverty? Why do some countries have high rates of inflation while others maintain stable prices? Why do all countries experience recessions and depressions—recurrent periods of falling incomes and rising unemployment—and how can government policy reduce the frequency and severity of these episodes? Macroeconomics, the study of the economy as a whole, attempts to answer these and many related questions. To appreciate the importance of macroeconomics, you need only read the newspaper or listen to the news. Every day you can see headlines such as INCOME GROWTH SLOWS, FED MOVES TO COMBAT INFLATION, or STOCKS FALL AMID RECESSION FEARS. Although these macroeconomic events may seem abstract, they touch all of our lives. Business executives forecasting the demand for their products must guess how fast consumers’ incomes will grow. Senior citizens living on fixed incomes wonder how fast prices will rise. Recent college graduates looking for jobs hope that the economy will boom and that firms will be hiring. Because the state of the economy affects everyone, macroeconomic issues play a central role in political debate.Voters are aware of how......

Words: 188819 - Pages: 756

Premium Essay

Chapter 5: Public Sector (Macroeconomics)

...CHAPTER 5 : Public Sector Government Expenditure Government expenditure is divided into 2 categories; 1. Operating Expenditure Consist of payment for the emoluments, pensions, any debt services charges and other maintenance expenditure. 2. Development Expenditure Comprises of the expenditure of defence and internal security, social responsibility that includes education and health, and the expenditure to run the economics policy like granting subsidy and train workers Sources of Government Revenue There are 2 major sources of government revenues: 1. Non-taxes Selling of goods and services, grant from other countries (example: donations for tsunami victims), domestic loans (example: government bonds) and loan from overseas (example: IMF) 2. Taxes a) Direct tax * Where the burden of tax cannot be transferred to other parties. * Collected by Department of Inland Revenue * Main direct tax:- I. Personal income tax The tax is levied on gross income II. Corporate Tax Imposed on company’s profit whether it is earned at home or abroad. III. Petroleum Revenue Tax Tax is levied on all petroleum companies operating in Malaysia. IV. Capital Gain Tax Levied on the increase in the value of capital asset between the time of purchase and the time of sale (sale of shares, factories etc.) V. Other tax Stamp duties (agreements), motor vehicles duties b) Indirect Tax * Where the burden of tax can be passed on to other......

Words: 485 - Pages: 2

Premium Essay

Macroeconomics

... Macroeconomic Theory Macroeconomic Theory A Dynamic General Equilibrium Approach Michael Wickens Princeton University Press Princeton and Oxford Copyright © 2008 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, 3 Market Place, Woodstock, Oxfordshire OX20 1SY All Rights Reserved ? A catalogue record for this book is available from the British Library This book has been composed in Times and typeset by T&T Productions Ltd, London Printed on acid-free paper press.princeton.edu Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 ∞ Contents Preface 1 Introduction 1.1 Dynamic General Equilibrium versus Traditional Macroeconomics 1.2 Traditional Macroeconomics 1.3 Dynamic General Equilibrium Macroeconomics 1.4 This Book The Centralized Economy 2.1 Introduction 2.2 The Basic Dynamic General Equilibrium Closed Economy 2.3 Golden Rule Solution 2.3.1 The Steady State 2.3.2 The Dynamics of the Golden Rule 2.4 Optimal Solution 2.4.1 Derivation of the Fundamental Euler Equation 2.4.2 Interpretation of the Euler Equation 2.4.3 Intertemporal Production Possibility Frontier 2.4.4 Graphical Representation of the Solution 2.4.5 Static Equilibrium Solution 2.4.6 Dynamics of the Optimal Solution 2.4.7 Algebraic Analysis of the Saddlepath Dynamics 2.5 Real-Business-Cycle Dynamics 2.5.1 The Business Cycle 2.5.2 Permanent Technology Shocks 2.5.3......

Words: 188884 - Pages: 756

Premium Essay

Macroeconomics

...This is the html version of the file http://kukmojungecn101.weebly.com/uploads/1/4/5/6/14568902/ps3ak_2012_ss2.pdf. Google automatically generates html versions of documents as we crawl the web. Page 1 1 Problem Set #3 Intermediate Macroeconomics 101Due 27/8/12 Question 1. (Ch6. Q1)Using the information in this chapter, label each of the following statements true, false, oruncertain. Explain briefly.A. Since 1950, the participation rate in the United States has remained roughly constantat 60%.B. Each month, the flows into and out of employment are very small compared to thesize of the labor force. C. Fewer than 10% of all unemployed workers exit the unemployment pool each year.D. The unemployment rate tends to be high in recessions and low in expansions.E. Most workers are typically paid their reservation wage.F. Workers who do not belong to unions have no bargaining power.G. It may be in the best interest of employers to pay wages higher than their workers'reservation wage.H. The natural rate of unemployment is unaffected by policy change. AnswerA. False. The participation rate has increased over time.B. False.C. False.D. True.E. False.F. Uncertain/False. The degree of bargaining power depends on the nature of the joband the employee’s skills.G. True.H. False. Page 2 2 Question 2. (Ch6. Q3)The natural rate of unemploymentSuppose that the markup of goods prices over marginal cost is 5%, and that the wage settingequation is W = P (1 - u )A. What is the real wage, as......

Words: 1494 - Pages: 6

Premium Essay

To Study the Impact of Oil Price Shocks on the Macroeconomic Performance of China

... Research Proposal on “To study the impact of oil price shocks on the macroeconomic performance of China” Table of Contents Dissertation Title 3 Introduction 3 Rationale of Study: Error! Bookmark not defined. Outline of the Research Project: Error! Bookmark not defined. Research Questions Error! Bookmark not defined. Research Aim and Objectives Error! Bookmark not defined. Significance of the study………………………………………………………………………………………………………………………..11 Research Methodology………………………………………………………………………………………………………………………….15 Research philoshophy…………………………………………………………………………16 Research Design…………………………………………………………………………………………………………………………………18 Data Collection…………………………………………………………………………………………………………………………………..22 Data Analysis…………………………………………………………………………………………………………………………………….28 literature review……………………………………………………………………………………………………………………………………36 References ……………………………………………………………………………………………………………………………………………42 Dissertation Title “To study the impact of oil price shocks on the macroeconomic performance of China” 1. Introduction Higher oil prices might affect the global economy through a variety of channels, including transfer of wealth from oil consumers to oil producers, a rise in the cost of production of goods and services, and impact on inflation, consumer confidence, and financial markets. In a pioneer work, Hamilton (1983) indicated that higher oil prices were responsible for almost all U.S recessions after World War II. Later other......

Words: 10757 - Pages: 44

Premium Essay

Macroeconomic

...Macroeconomic Picture of Agriculture sector in Indian Economy Theodore Schultz began his acceptance speech for the 1979 Nobel Prize in Economics observing: “Most of the people in the world are poor, so if we knew the economics of being poor we would know much of the economics that really matters. Most of the world's poor people earn their living from agriculture, so if we knew the economics of agriculture we would know much of the economics of being poor” (Shultz, 1979). Existing empirical evidence on the impact of macroeconomic variables on agriculture remains mixed and inconclusive. This paper re-examines the dynamic relationship between monetary policy variables and agricultural prices using alternative vector auto regression (VAR) type model specifications. Directed acyclic graph theory is proposed as an alternative modeling approach to supplement existing modeling methods. Similar to results in other studies, this study Â’s findings show that over the time period analyzed (1975–2000), changes to money supply as a monetary policy tool had little or no impact on agricultural prices. The primary macroeconomic policy instrument that affects agricultural prices is the exchange rate, which is shown to be directly linked to interest rate, a source of monetary policy shock. The Transmission of Exchange Rate Changes to Agricultural Prices (July 2009) provides empirical evidence that price and exchange rate transmission for agricultural products is low in most......

Words: 670 - Pages: 3

Free Essay

Demand Shock

...An economic shock is an unexpected and unplanned event that has affects on an economy. These shocks can affect both supply and demand causing both positive and negative effects on an economy. The nature of the impact on the economy as well as five macroeconomic objects of these shocks will depend on the strength of an economy at the time, which will determine how well they can react and coup with these shocks. A demand side shock is an event that suddenly increases or decreases the demand for goods and services. In the event of major sports completion such as London 2012 could be referred to as mainly a shock to demand due to its effects on AD and its ability to boost growth in the economy. The London Olympics 2012 forced the government to use fiscal stimulus (government spending) in order to build infrastructure witch would be needed for the games e.g. stadiums and the Olympic village. The Olympics also encouraged firms to invest due to the fact that they would be able to advertise heavily as well as gain high returns due to the tourism generate by the games. AD= C+I+G+(X-M). Both in vestment and government spending rose and there for had a positive effect on Aggregate Demand. The employment of workers to build and running these complexes helped reduce unemployment in the short term as well as increasing household income, resulting in an increase in consumption causing a rise in AD. This shift in AD is shown by the shift from AD1 –AD2. Another major contributing......

Words: 771 - Pages: 4

Premium Essay

Macroeconomics

...Assignment Macroeconomics 1.Monetary policy is the action of a central bank that influences the amount of money and credit in the U.S. economy, determine rate of growth of the money supply, which affects interest rates. What happens to money and credit affects interest rates and the performance of the U.S. economy. 2. 3 different tools: 1. Open market operations. It means that the Fed doesn’t decide on its own which securities dealers it will do business with on a particular day. Open market operations are flexible and the most used tool of monetary policy. 2. The discount rate is the interest rate, which charge by Federal Reserve Banks to depository institutions on short-term loans. 3. Reserve requirements are amount of money are required to hold in reserve against deposits in bank accounts. 3. This policy is directed on accelerating economic growth by increasing money supply. Expansionary policy depends on aggregate demand growth. AD = (C+I+G+M) By increasing the amount of money in the economy, the central bank encourages private consumption. Increasing the money supply = decreases the interest rate, which encourages lending and investment. The increase in consumption and investment leads to a higher aggregate demand. A central bank uses to implement an expansionary monetary policy is through open market operations. The central bank will purchase government bonds, which will cut interest rates. 4.To decrease unemployment in a......

Words: 476 - Pages: 2

Premium Essay

Macroeconomics

... Flexible Organization Macroeconomics, sixth edition is organized around two central parts: A core and a set of two major extensions. The text’s flexible organization emphasizes an integrated view of macroeconomics, while enabling professors to focus on the theories, models, and applications that they deem central to their particular course. The flowchart below quickly illustrates how the chapters are organized and fit within the book’s overall structure. For a more detailed explanation of the Organization, and for an extensive list of Alternative Course Outlines, see pages xiii–xv in the preface. INTRODUCTION A Tour of the World Chapter 1 A Tour of the Book Chapter 2 THE CORE The Short Run The Goods Market Chapter 3 Financial Markets Chapter 4 Goods and Financial Markets: The IS-LM Model Chapter 5 The Medium Run The Labor Market Chapter 6 Putting All Markets Together: The AS-AD Model Chapter 7 The Natural Rate of Unemployment and The Phillips Curve Chapter 8 The Crisis Chapter 9 The Long Run The Facts of Growth Chapter 10 Saving, Capital Accumulation, and Output Chapter 11 Technological Progress and Growth Chapter 12 Technological Progress: The Short, the Medium, and the Long Run Chapter 13 EXPECTATIONS THE OPEN ECONOMY Expectations: The Basic Tools Chapter 14 Financial Markets and Expectations Chapter 15 Expectations, Consumption, and Investment Chapter 16 Expectations, Output, and Policy Chapter 17 EXTENSIONS Openness in......

Words: 352657 - Pages: 1411

Premium Essay

Macroeconomics

...MACROECONOMICS PRIYANKA DEY FT171068 What is actually Macroeconomics? The branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity. So the word can be interpreted as the driving forces, factors and decisions ultimately implemented as policies that corresponds to the growth of economy of the nation are included in Macroeconomics. Let’s focus on the prospects how China managed to enter into the race turning its macroeconomics strategies and outshine as one of the major economic success taker with respect to United States. UNITED STATES(18558.13 Billions of $ GDP)- The U.S. economy has been the largest and most important in the world. The U.S. economy represents about 20% of total global output, and is still larger than that of China. The U.S. economy features a highly-developed and technologically-advanced services sector, which accounts for about 80% of its output.The U.S. also has an important manufacturing base, which represents roughly 15% of output. The U.S. is the second largest manufacturer in the world and a leader in higher-value industries such as automobiles, aerospace, machinery, telecommunications and chemicals.The country has access to abundant natural resources and a...

Words: 503 - Pages: 3

Premium Essay

Macroeconomics

...100% *21266* Fri, Nov 9, 2001 11:52 AM C H A P T E R The Science of Macroeconomics The whole of science is nothing more than the refinement of everyday thinking. — Albert Einstein 1 O N E 1-1 What Macroeconomists Study Why have some countries experienced rapid growth in incomes over the past century while others stay mired in poverty? Why do some countries have high rates of inflation while others maintain stable prices? Why do all countries experience recessions and depressions—recurrent periods of falling incomes and rising unemployment—and how can government policy reduce the frequency and severity of these episodes? Macroeconomics, the study of the economy as a whole, attempts to answer these and many related questions. To appreciate the importance of macroeconomics, you need only read the newspaper or listen to the news. Every day you can see headlines such as INCOME GROWTH SLOWS, FED MOVES TO COMBAT INFLATION, or STOCKS FALL AMID RECESSION FEARS. Although these macroeconomic events may seem abstract, they touch all of our lives. Business executives forecasting the demand for their products must guess how fast consumers’ incomes will grow. Senior citizens living on fixed incomes wonder how fast prices will rise. Recent college graduates looking for jobs hope that the economy will boom and that firms will be hiring. Because the state of the economy affects everyone, macroeconomic issues play a central role in political debate.Voters are aware of how......

Words: 188818 - Pages: 756

Premium Essay

Current Macroeconomic Situation in Us and Prospects for Automotive Sector

...Current Macroeconomic Situation in US and Prospects for Automotive Sector The U.S. automobile industry is large and dynamic sector contributing significantly to the nation’s output and employment. Auto industry provides the basis for a mass of related service and support industries. The industry is highly volatile and sensitive to global and domestic economic changes. During the 1960’s & 1970’s the big three accounted for 90% of automobiles purchased in U.S. However, since 1980’s foreign manufacturers entered the U.S market. So, the industry faced intensive competition from Japan, Germany & other countries. During 1998’s availability of foreign substitutes flooded the U.S automotive industry. Foreign producers, particularly Japanese, provided solitary competition to The U.S. oligopoly. Besides, the demand for automotives are highly found to be fickle and sensitive to macroeconomic conditions like, income, unemployment, interest rate etc. Regarding cost of production, The U.S automotive firms are characterized by huge fixed and variable costs. The variable cost in terms of wages and other benefits are, because most of the automobile firms like GM, Ford, and Chrysler have long been unionized. The United Auto Workers (UAW) ensures higher wages and generous benefits in the form of health insurance and Medicare for automotive industry workers than in any other non unionized firm. Eventually, UAW contracts with the auto firms lead to mounting variable and fixed......

Words: 1574 - Pages: 7