Project on Monetary Policy, ESG Risks, and Central Bank Strategies

This project evaluates the efficacy of monetary policy over the last decade, examining how central banks have reviewed and adapted their strategies to address economic challenges. It explores the tools employed, such as interest rate adjustments and balance sheet expansions, and assesses their impact on employment, inflation, and economic growth. Additionally, the project delves into environmental, social, and governance (ESG) risks to businesses, highlighting the importance of considering external factors like government policies, social trends, and environmental concerns. The analysis covers how businesses must adapt to changing customer preferences, technological advancements, and the increasing focus on sustainability to ensure long-term survival and success. The project also considers the impact of factors like globalization and government regulations, such as Brexit, on business operations and competitiveness.

Project
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TABLE OF CONTENT
3 Evaluation of efficacy of monetary policy over last decade and the way central banks are
reviewing policy..........................................................................................................................3
4 Environmental, social and governance risk to business...........................................................4
REFERENCES................................................................................................................................6
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3 Evaluation of efficacy of monetary policy over last decade and the way central banks are
reviewing policy
Monetary policies are made by central bank of world in order to control supply and
demand of money in the market for better lifestyles of individual. As per Federal open market
committee reduction in interest rates will lead to increase in demand of products and services in
the economy thus resulted in more employment and outcome. Therefore FOMC has decided to
use federal fund as instrument for economic growth and development of world but in reality it
does not work effectively resulting in less number of employment and inflation within countries.
there is little difference in level of employment, output growth and inflation rates since decades
that shows strategy of FOMC has not worked effectively. Thus, such long financial crisis in
global economy has forced central bank to plan effective strategies to cope up with such
challenges (Ashworth, 2016). Central bank is taking continuous steps to reduce inflation rate and
promote economic growth and development so that people can live better and qualitative life.
Some of the measure of central bank has lead to distortion in few areas of capital market that
resulted in ineffective result. Thereby bank need to review its strategies and plan to evaluate
areas in which it lack that need to be improved for further growth and development of country.
Central banks has used different monetary policy tolls such as unconventional by analysing and
evaluating various financial crises that are faced by country. Bank has planned to expand
lending program, increased balance sheet to encourage effective flow of money and capital
within economic so that people can live better and healthy life. Banks are focusing on purchase
of large scale asset and investment from various individual to promote economic growth of
countries. Some of the countries have cut their interest rate to zero to increase investment in the
economic and flow of capital from one sector to another. As per report of international settlement
unconventional monetary policy tool used by central bank has resulted in positive outcome
through promoting growth and development within economy. It has reduces unemployment rate,
inflation rates and increase disposable income of customers thus they are some of the positive
impact of unconventional tool used by central bank (Levieuge, Lucotte and Pradines-Jobet,
2019). Most of the investors are ready to invest in various sectors due to low interest rates and
yield of maximum output thus lead to effective flow of money within economy. Central bank has
avoided deflationary spiral to large extended and central bank has set one of the objective to
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reduce inflation rate and enhance growth of economic. Central bank has planned to improve
market function through expanding balance sheet policies but it had some of side effect on
market functioning (Pyka and Nocon, 2016). Therefore, various corrective actions need to be
taken as review from experienced gathered while effective implementation of various strategies
that are formulated by central banks. Some of the policies of central bank were successful and
effective whereas other policy have not work effectively thus impacted on overall growth and
expansion of economic. Negative impact of balance sheet policy was that it reduced availability
of bond in the market but central bank has introduced it as countermeasure. There are various
change in environment so central bank needs to continuous review its policy and tool that are
used for development of economy (Richter, Schularick and Shim, 2019). Monetary policies is
one of the powerful and effective tool used by central bank to control supply and demand of
money within economic but is used prolonged can result in negative impact or side effects. Thus,
it increase aggregate expenditure by influencing large number of investors and customers to
make purchase or invest in particular investment by taking more amount of risk. Therefore
continuous financial crises within global economy have lead central bank to review their policy
and find effective method to resolve various challenges (Choi and et.al., 2018).
4 Environmental, social and governance risk to business
Business involves various activities such as manufacturing, sales and marketing and finance
so enterprise that wants to expand its market share across world need to identify various external
factors that can be prove to be threat for company operation. Company before entering into new
market has to identify policies of government, taste and preference, environment issue and legal
laws for smooth operation of business. Customer’s needs and preference change continuously
therefore company needs to effectively identify such preferences of people for long term growth
and survival of enterprise in the industry (Adrian and Liang, 2016). Needs and requirement of
people depend upon various factors such as social trends, custom, tradition and their culture so
company before starting its operation need to analysis such factors to protect itself from various
threats. People are getting more and more aware about recent technology and their importance in
satisfying need of people. Such as most of people like to purchase product through online thus
change in global trend has forced companies to change their operation in order to sustain and
growth in the industry. Most of the company market their products and service through social
media as large number of people spend their lot of time having fun and enjoyment through social
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media (Borio and Zabai, 2018). Therefore companies that doest not changes their operation as
per change in customer trends and preferences are not preferred by customers and their sales
have been decreased. Environment is the most important and recent issue that is impact on
business operation adversely as customers and government of country are becoming highly
concerned about environment. Lot of factories affect environment adversely through disposal of
waste in rivers thus possessing threat for both human and animal. Companies that are not taking
steps for effective utilisation of resource and reduction of wastage, emission of harmful gases has
to face risk of high government intervention. At the same time most of the customers does not
like to purchase products of company that are not taking initiate to reduce waste in order to
ensure better health and safety of individual (Verschoor, 2017). Environment issue has result in
increased cost of production as companies have to make large amount of investment to effective
utilise resources and reduce amount of wastages. So it can be stated that environment is another
factors that possess threat for business that are operating across world. Government impose
various policies, rules and regulation to ensure safety and security of people that are living in the
society. Various countries have different rules and regulation that need to be followed by
companies while operating its function in order to grow and expand its business. Government
impose various rules and regulation for import and export of product through increasing or
decreasing tax rates and duties (Shapiro, 2019). Government impose high tax on import to
restrict function of various businesses and reduce competition level within economy. Thus local
companies and supplier can early operate their various function and grow and survive in the
market. One of the policies of UK government such as Brexit has resulted in decrease in import
and export of products and services as UK was main trading partner with European Union. Thus,
uncertainty about impact of Brexit on business has increased threat for company and impact on
long term growth and survival (Weber and Feltmate, 2016). On the other hand globalisation and
liberalisation had lead to increase in level of competition among existing companies thus forcing
them to bring continuous changes to meet customer’s demand. Therefore it can be concluded that
all external factors such as social, environment and governance impact on global business
operation and productivity.
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REFERENCES
Journals and Books
Adrian, T. and Liang, N., 2016. Monetary policy, financial conditions, and financial stability.
Ashworth, J., 2016. Quantitative easing by the major western Central Banks during the global
financial crisis. In Banking Crises (pp. 251-270). Palgrave Macmillan, London.
Borio, C. and Zabai, A., 2018. Unconventional monetary policies: a re-appraisal. In Research
Handbook on Central Banking. Edward Elgar Publishing.
Choi, J. J and et.al., 2018. Business groups and corporate social responsibility. Journal of
Business Ethics, 153(4). pp.931-954.
Levieuge, G., Lucotte, Y. and Pradines-Jobet, F., 2019. Central banks’ preferences and banking
sector vulnerability. Journal of Financial Stability, 40. pp.110-131.
Pyka, I. and Nocon, A., 2016. DYNAMICS OF LENDING ACTIVITY OF POLISH BANKING
SECTOR TOWARDS LOW INTEREST RATE POLICY OF CENTRAL
BANKS. Transformations in Business & Economics, 15.
Richter, B., Schularick, M. and Shim, I., 2019. The costs of macroprudential policy. Journal of
International Economics, 118. pp.263-282.
Shapiro, J., 2019. Implications and Uses of Environmental, Social, and Corporate Governance
(ESG) Scores (Doctoral dissertation, Brandeis University).
Verschoor, C. C., 2017. SUSTAINABILITY REPORTING INCREASES: Nonfinancial reports-
including those on environmental, social, and corporate governance issues-are the new
norm. Strategic Finance, 99(4). pp.20-22.
Weber, O. and Feltmate, B., 2016. Sustainable banking: Managing the social and environmental
impact of financial institutions. University of Toronto Press.
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