Money and culture

Money and Culture
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Money and Culture
The international monetary fund (IMF) is an international organization that seeks to promote financial stability and global economic growth to reduce poverty. The IMF ensures that monetary discipline is enforced globally. It also stabilizes the Exchange rates across money to facilitate adjustments in international payment (Ong, 2014). On the other hand, the World Bank works on economic growth and decreasing the level of poverty. There are various factors, political and economic that influences the exchange rates of foreign currency. One of them is government spending. Government spending can affect the foreign exchange rates in various ways as discussed below.
Fiscal policy refers to the use of taxes and government spending to slow down or grow a country’s economy. The fiscal policy use prices, interest rates or income changes to modify exchange rates. If the government lowers taxes, there is an increase in income translating to more spending and an increase in spending (Alesina & Giavazzi, 2013). The increase in imports means that more dollars will be sold to purchase the imported goods hence decreasing the exchange rate of the dollar.
The government can grow the economy through the reduction of taxes. This will lead to more spending and an increase in goods and services. The increase in demand will increase prices making the country’s exports expensive and imports cheaper. The cheap imports will translate to a huge demand for the foreign currency and low demand for the dollar hence a low exchange rate.

Under interest rates, the government can decide to sell bonds that raises the interest rates (Development, 2013). With increased interest rates, foreign currency will flow into the economy as investors are always looking for a better profit.
In conclusion, the IMF ensures that monetary discipline is enforced globally unlike the World Bank that works on economic growth and decreasing the level of poverty. One of the factors that affect exchange rates is government spending. The government can decide to use the fiscal policy to slow down or grow a country’s economy.
References
BIBLIOGRAPHY l 1033 Alesina, A., & Giavazzi, F. (2013). Fiscal policy after the financial crisis. Chicago : The University of Chicago Press.
Development., O. f.-o. (2013). Succeeding with Trade Reforms : The Role of Aid for Trade. Paris : OECD Publishing.
Ong, L. L. (2014). A Guide to IMF Stress Testing. Washington: International Monetary Fund.