Fiscal Policy and Foreign Trade Research Paper

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Decisions and policy changes have implications all around the globe, not just in the nation that makes these changes. Improving a nation's current account, which is a product of a depreciating dollar where investors move their money to foreign currencies and trade products, also helps to boost the legitimacy and perceived strength of an economy.

In Canada, this has the effect of depreciating the currency and boosting aggregate demand, which also helps to boost the country's GDP (Beetsma, Giuliodori, and Klaasen, 2006). This is a positive development within the economic functions of a country like Canada, whose currency has much influence on its trade deficit. It can be seen that economic and fiscal policy within the borders of one country often affects others around the world. There are many different fiscal policy tools and methods of manipulating action within the economy. The global economic recession has helped to illustrate this fact in a way that could not have been accomplished in previous eras. The globalization of the world's economies has had both positive and negative effects for all countries.

By helping to either increase or decrease the value of currencies as well as affecting trade deficits, economies can help to stabilize each other in this recession (Beetsma, Giuliodori, and Klaasen, 2006).

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Indicators like employment rates as well as tools like price and wage controls can help to exert more pressure against inflationary cycles, just as the raising of interest rates by the central bank, or the Fed in the U.S. does. These, as well as other money and fiscal policy multipliers have specific and related effects when changes are made in correspondence to making such moves. This is to say that not only is the world's economic activity related to the overall health of every nation's economy, but the fiscal policies and tools used to help affect change and stability are also related as well, however complex these relationships are (Beetsma, Giuliodori, and Klaasen, 2006). Without a doubt, as the complexity of the global economy increases, nations will have to rely more on cooperation and synchronizing their efforts to help stabilize their economies than they ever have had to in the past.

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