In conjunction with tight fiscal policies, austere monetary policy has reduced demand for productive loans, and consequently, investments and growth, thus adding to global employment problems. At the same time, exchange rates appreciate due to high short-term capital inflows, adversely affecting employment-intensive export-oriented sectors. Governments are compelled to reduce fiscal expenditures to keep down inflation and to retain the confidence of foreign investors, even in the presence of underutilized capacity and large-scale unemployment. Policies tend to be deflationary, prompting reductions in consumption and hindering employment creation.