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Impact of Five Key Economic Variables to Banks

Identify five key economic variables that could represent major opportunities or threats to a bank in your town or city. Identify which that you believe to be most important, and describe at least one strategic response.

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There are key economic variables that could pose opportunities or threats to banks in any town or city. These are inflation, unemployment, recession, economic boom, and exchange rate.

Inflation is "an increase in the general price level, and is typically expressed as an annual percentage rate of change" (Santoni, 1986).
The same study by Santoni (1986) found out that any unexpected resurgence in inflation would be harmful to banks. The real value of bank deposits will be rendered devalued during inflationary period. Depositors will shy away from banks. Investors will shun bank loans during this period resulting to bank run and possibly bank closure.

Unemployment creates ripple effect in the banking sector. A high ...

Solution Summary

This is a 375 word discussion that summarizes the impact of five key economic variables to banks.