A SAIS analytical essay is a critical requirement for graduate students seeking admission to John Hopkin’s Paul H. Nitze School of Advanced International Studies. Here is an example of an analytical essay that meets SAIS criteria for admission.
International markets experienced a huge blow in October 2022. This came due to a growing expectation that the US Federal Reserve is backed into a corner and has to increase interest rates aggressively. The repercussions may posit a devastating butterfly effect.
The US consumer price index was 8.6% in May 2022. This was the highest it had come in since 1981. The market priced in a 75 basis point hike, prompted by the Fed. This, in turn, caused the European Central Bank, ECB, to call an emergency monetary policy meeting due to rising bond yields across the eurozone. So far, the Fed and the ECB are set to play a dangerous dance that poses a problem for other economies.
It is crucial to consider the US dollar’s central nature in global economics. Many countries hold their reserve currency in US dollars. A rise or drop in its value significantly affects how they do business. An aggressive Fed may cause ripple effects across the world. In this way, the recent decision by the US to increase lending rates triggered a stock multi-day sell-off globally.
Kristina Hooper, an Invesco global market strategist, noted that the Fed is, in a sense, the world’s central bank. This move, therefore, could trigger a global recession. The US has to carefully navigate these dangerous waters to engineer a ‘soft landing.’ It needs to remain data-responsive and vigilant. This vision is muddied by the economy’s evident slowdown in the near future, making the ‘soft landing’ more fictitious than factual.
Monetary policy is not a surgical tool; we can often consider it a blunt instrument. The Fed has a monumental task of slowing the nation’s economy just enough to curb inflation without plunging the country into a recession. As such, the consumer price index hike does not bode well for the government, and recession risks have risen. Further interest rate increase cycles down the road will plausibly limit demand for US products and devastate financial markets.
Rising US Fed rates are primarily bad for emerging market economies. They lead to capital outflows, boost debt burdens, and may trigger financial crises as market conditions stifle economic growth. For instance, in the 1980s, the Volcker disinflation triggered an increase in the number of EMEs that faced financial troubles. However, the mid-2000s Fed rate hike did little to destabilize EMEs as most of them weathered this issue quite well.
The devastating effect of Fed rate hikes on EMEs is largely dependent on one factor, if we ignore the domestic conditions in the EMEs themselves, the reason for the “spillovers.”
Favorable growth prospects would likely have minimal effects on emerging markets. This is because the US would have higher investor confidence and boost its import demand from its trading partners. The overall effect would cancel out the costs of higher rates. In contrast, if hawkish changes in Fed policy or worries concerning inflation cause the hike, the outlook is grim with potentially disruptive effects on EMEs.
US Fed policy has a staggering amount of control over global monetary policies. Increasing or decreasing Fed rates has a butterfly effect that may be uncertain to predict. However, faith in the US government’s potential to rebound would benefit the global economy despite the recent interest rate hike. That’s how strongly the world believes in the US dollar.
A tactful SAIS analytical essay will go a long way in securing a position at John Hopkins SAIS.
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You are seeking admission to John Hopkin’s SAIS, specifically, School of Economics. Write an an analytical essay on any issue of your choosing related to economics. The University board will use this essay to determine your eligibility.