Question that is being asked
Are the money markets of disaster prone countries adversely affected by the recovery efforts implemented by the government?
Specific Points to Consider:
- Impact of recovery efforts in the form of cash infusions into the local economy in order to stimulate recovery efforts.
- Subsequent consequence of stimulus efforts on trade and investments within the country.
It is normally the case that in instances where natural disasters occur within certain countries, the central bank often releases monetary infusions into the local economy in order to encourage development and offset the economic damage that has occurred. Unfortunately such a strategy can actually result in a detrimental increase in the value of local currencies often impacting local economies that were far away from the area where the natural disaster occurred.
Specific Points to Consider
- Impact of recovery efforts in the form of cash infusions into the local economy in order to stimulate recovery efforts.
- Subsequent consequence of stimulus efforts on trade and investments within the country.
The specific point that this study will attempt to investigate is whether the current processes utilized by disaster prone countries in their recovery efforts actually have an adverse impact on their money markets which could have a detrimental effect on their local economies as a direct result of goods that have increased in price due to a significantly stronger local currency. Such an examination could help to explain sudden increases in the price of exports from a country that has recently been impacted by a natural disaster.
How will the question be answered
- Use of online databases that contain the history of the rise and fall of currency values over the past decade.
- Comparison with historical records regarding various natural disasters that have impacted countries such as Japan, China, the Philippines etc.
- Comparison with relevant economic data involving trade and investment in other parts of the countries that are examined.
The research process will focus on the historical market value of currencies before and after an event and a subsequent examination will be conducted to determine what is the subsequent impact on trade and investment as a direct result of government infusions of stimulus cash into the local economy to help recovery efforts.
Hypothesis
- This study assumes that:
- “Infusion of funds from the central bank during natural disasters results in higher process of exports as a direct result of an increase in the value of the local currency”.
- “The current disaster recovery processes utilized by the central banks of disaster prone countries is ineffective given that it has the potential to adversely impact the economies of other regions that were not impacted by the natural disaster”.
References
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