Policies
Fiscal Policy
Over the past decade, Nicaragua has been under expansionary policy. Government Spending has steadily increased and it is reported that government spending accounts for 33.7% of the GDP. Since January of 2002 til present, Nicaraguan Government spending has increased from about $100 million to roughly $135 million. These expansionary efforts are definielty deemed as necessary for Nicaragua's struggling economy. The current tax rates in Nicaragua are as follows: Income tax: 30%, Corporate Tax: 30%, and sales tax: 15%. Nothing too striking here, the only problem is that actually collecting those taxes is not the easiest thing to do in such a poor country. The great majority of consumers buy and sell goods on a cash basis and income is generally not recorded. There is no evidence of recent tax increases in Nicaragua and because of this, combined with increased government spending, conclusions can be drawn that the Nicaraguan Government is set on expanding.
Monetary Policy
Much like fiscal policy in Nicaragua, the monetary policy is also an expansionary one. There has been a great increase in the money supply in the last couple of years, even reaching record highs. In just the last 2 years, the M3 money supply shot up by $652 million. More money means more willingness to spend. That is a necessity for a developing country. This increase could also be responsible for Nicaragua's fairly high inflation rate, but for a developing country, it's nothing to worry about. Interest rates have gone virtually unchanged throughout the past decade. In the late 80's, they shot up to extremely ridiculous amounts, even reaching over 100,000 percent at one point. Since 2003, however, they have hovered right around 13% making it possible to borrow when needed. These interest rates, while steady, are still on the high end, which discourages entrepreneurship because of the lack of start-up funds. Nonetheless, with such a high increase in the money supply, Nicaragua is experiencing expansionary policy.
Bibliography
http://www.tradingeconomics.com/nicaragua/government-spending
http://www.taxrates.cc/html/nicaragua-tax-rates.html
http://www.nationsencyclopedia.com/economies/Americas/Nicaragua-POLITICS-GOVERNMENT-AND-TAXATION.html
http://www.indexmundi.com/facts/nicaragua/lending-interest-rate
http://www.tradingeconomics.com/nicaragua/money-supply-m3
http://mashopsimg.com/steidl/pic/0199-nic-2006.jpg
http://www.taxrates.cc/html/nicaragua-tax-rates.html
http://www.nationsencyclopedia.com/economies/Americas/Nicaragua-POLITICS-GOVERNMENT-AND-TAXATION.html
http://www.indexmundi.com/facts/nicaragua/lending-interest-rate
http://www.tradingeconomics.com/nicaragua/money-supply-m3
http://mashopsimg.com/steidl/pic/0199-nic-2006.jpg