TITLE:
The Impact of Leadership on Economic Prosperity: A Case Study of United States Global Leadership Post Covid Era
AUTHORS:
Oladapo Rasul, Mona Sabetimani, Biliamin Alli
KEYWORDS:
Federal Reserve Policies, Policymakers, Monetary Policies, Interest Rates, Money Supply Variations, Technological Advancements, Leadership
JOURNAL NAME:
Open Journal of Business and Management,
Vol.12 No.2,
March
25,
2024
ABSTRACT: The United States is a frontrunner in diverse
technology-driven sectors, pivotal for economic growth, competitiveness, and
societal advancement. Federal Reserve policies, comprising interest rates, open
market operations, and quantitative easing, hold considerable sway over
economic conditions, investment climates, and funding accessibility. This study analyzes the intricate interplay between Federal Reserve
policies and investment in technology- driven industries. The Federal Reserve operates under Congress’s mandate
to bolster maximum employment, stable prices, and moderate long-term interest
rates. Its roles encompass monetary policy administration, financial system
stability, oversight of financial institutions, efficient payment systems, and
consumer protection. Numerous factors shape
investment in technology-driven industries,
including technological advancements, regulations, market demand,
funding access, and global economic conditions. Notably, Federal Reserve-set
interest rates emerge as a pivotal determinant influencing investment decision.
Lower rates stimulate innovation investment by cutting borrowing costs,
fostering higher R&D spending, supporting startups, and attracting venture capital. This study utilized time series data from the World Bank and the US
Bureau of Economic Analysis spanning 2000 to 2022. Ordinary Least Squares (OLS)
regression analysis reveals a significant positive relationship between lending
rates and technology innovation. Changes in lending rates impacted by Federal
Reserve policies notably influenced technological advancements. Similarly, a
positive correlation was found between money supply variations influenced by
Federal Reserve policies and technological advancements. The transmission mechanism of monetary policies elucidates how changes in
central bank policies affect economic variables and investment decisions in
technology-driven sectors. Channels like the interest rate, credit, asset
price, and expectations channels shed light on how Federal Reserve policies
shape investment climates and innovation landscapes. In summary, this study establishes a robust link between specific Federal
Reserve policies (lending rates and money supply) and technological innovation
in the US economy. Policymakers should balance immediate economic needs with
long-term innovation incentives. Companies in technology-driven sectors should
align strategies with expected effects of monetary policies, emphasizing the
creation of a supportive environment for continuous technological progress.