Blogpost 2: Coca-Cola Company
Billie Shattuck
Regent University
ECON 230 (02): Macroeconomics
April 22, 2022
Blogpost 2: Coca-Cola Company
The Policy of the Federal Reserve Bank Affects the Coca-Cola Company’s Economical Growth
As our text explains, “one of the Federal Reserver’s most powerful tools is not its influence over the money supply but its influence over expectations, namely its ability to boost market confidence” (Cowen & Tabarrok, 2021, p. 761). Additionally, “monetary policy can influence aggregate demand, or target credit markets at the aggregate level, but cannot push the demand down for one market segment, and keep the demand for everything else up” (Cowen et al., 2021, p. 767). According to Carré & Le Maux (2020),
The twofold evolution of the international monetary and global financial system created both a supply of (due to the internationalization of the dollar) and demand for (due to financial globalization) liquidity from the global lender of last resort when the dollar funding markets collapsed. (p. 4)
The Policy of the Central Bank’s Effect on the Key Market and the Coca-Cola Company’s Economical Growth
According to Coca-Cola (2022), “during the three months and year ended December 31, 2021, the company recorded an impairment charge of $78 million related to a trademark in Europe, driven by a change attempting to renew the license agreement for a certain brand” (p. 18).
According to Clark (2015), “rules regarding monetary policy have come to dominate central bank decision-making, and their management of market expectations as regards longer-term intentions” (p. 4). Furthermore, “quantitative easing and negative real interest rates made a significant difference to the prospects of the US and global economies” (Clark, 2015, p. 2).
Effect of Fiscal Policies of the Home Country and Its Key Market on the Company
According to our text, “fiscal policy is likely to be needed and most effective when the economy needs a short-run boost, even at the expense of the long-run or the problem is a deficiency in aggregate demand rather than a real shock” (Cowen et al., 2021, p. 819).
However, “a real shock that reduces capital and labor productivity, shifts the long-run aggregate supply curve, reduces productivity, increases aggregate demand, and increases the growth rate, but the inflation rate is much higher” (Cowen et al., 2021, p. 815).
According to Clark (2015), “the actions, statements of intent, and market expectations as regards the possible policies of the ECB, the Fed, the Bank of England’s (BoE) Monetary Policy Committee (MPC), and other national central banks have assumed a level of importance” (p. 2).
References
Carré, E., & Le Maux, L. (2020). The Federal Reserve’s dollar swap lines and the European
Central Bank during the global financial crisis of 2007–09. Cambridge Journal of Economics, 44(4), 723-747. https://doi.org/10.1093/cje/beaa015
Clark, G. L. (2015). The geography of the European Central Bank: form, functions, and
legitimacy. Journal of Economic Geography, 15(5), 855-881. https://doi.org/10.1093/jeg/lbv015
Coca-Cola (2022). Investor Relations, 2021 Q4 Earnings Release. Retrieved April 22, 2022
from https://d1io3yog0oux5.cloudfront.net/_234b07a3d140bc6ac2699fc70603d966/cocacolacompany/news/2022-02-10_Coca_Cola_Reports_Fourth_Quarter_and_Full_Year_1046.pdf
Cowen, T. & Tabarrok, A. (2021). Modern Principles of Economics, 5th ed. Worth Publishers,
One New York Plaza, New York, NY. ISBN 978-1-319-32946-4 (epub).