...Introduction Stock market is a place for listed companies to raise capital .Companies can use the capital for continuing operating activities and expand business. However, the investors are explained to get a positive return from dividend and capital gain in the stock market. Based on the history, the economic condition will influence stock market. For instances, Malaysia faced deflation during the Asian crisis in years 1997. It caused the KLCI index sharply reduced from 1207.43 to 470.43. It have been shown that the investors need to predict the stock prices based on the macro factors to get an abnormal return from stock market There were a lot of researches to study the relationship between macroeconomics variables and stock returns. It is important to study the interaction of macroeconomics factor and stock return. Based on the study, the public can identify which factors can influence the stock market and use the knowledge to predict movement of stock price. According to Wongbangpo & Sharma (2002), the research can reveal the functions of stock market in identify the change in economic condition and also can predict the future performance of stock market. Besides, the study will be useful for the stock market participators. Clare & Priestley (1998) said that the study of the risk factor relationship of stock market will be useful for corporate manager to undertake cost of capital calculation. Moreover, the fund managers can use the information from the result of study to make...
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...Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster) Chapter 18 Debates in Macroeconomics: Monetarism, New Classical Theory, and Supply-Side Economics 18.1 Keynesian Economics 1 Multiple Choice 1) Who wrote the General Theory of Employment, Interest, and Money? A) Adam Smith B) David Ricardo C) Milton Friedman D) John Maynard Keynes Answer: D Diff: 1 Topic: Keynesian Economics Skill: Fact 2) Keynesian economics includes the idea that A) economic policies are ineffective. B) the economy is basically stable. C) prices adjust to clear the markets. D) labor markets don't always clear due to wage rigidities. Answer: D Diff: 1 Topic: Keynesian Economics Skill: Fact 3) Among the propositions of the Keynesian school of thought is A) economic policies are ineffective. B) aggregate supply management is the key to a stable economy. C) aggregate demand determines equilibrium output. D) rational expectations. Answer: C Diff: 1 Topic: Keynesian Economics Skill: Fact 4) Keynes believed which of the following? A) The government has a role to play in fighting inflation, but not in fighting unemployment. B) The government has a role to play in fighting unemployment, but not in fighting inflation. ...
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...Supply and Demand Simulation The simulation shows over the years, there are several changes to the population of Atlantis and thus the supply and demand of two-bedroom apartment housing. The changes in the supply and demand curves cause the equilibrium price to rise and fall. In the simulation, the price elasticity of demand affects both the customer’s decision to rent and the company’s pricing strategy. The principles of microeconomics and macroeconomics are both active in the simulation. Examples of microeconomics are the individuals and the GoodLife Company as they made choices because of scarcity and regulation. An example of macroeconomics is the economy-wide change of the government that places a price ceiling on apartments for GoodLife. The two examples of microeconomics classify as such because they have a limited effect on the organization or the individual in the economy. The government’s regulation of price ceiling classifies as macroeconomics because it has an aggregative effect on the economy. Individual consumer choice causes increases and decreases in demand that the company can respond to. The company can modify its price to achieve equilibrium in reaction to consumer demand. However, this is not the case when government sets regulation on product price. In the beginning of the simulation, when the company lowers its rate to $1,050 per month, the vacancy rate hits target level. At this price strategy, the company can fill vacancies for 1700 apartments, leading...
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...Chapter – 3.0 An overview – Banking sector & Stock Exchange and Conceptual framework – Macroeconomic variable |3.1 An overview of Banking sector and Stock market of Bangladesh | We are interested in investigating the relationship between stock prices and macroeconomic variables because individual investors can earn abnormal profits by exploiting this relationship and the existence of this utilizable opportunity would then dangerously distort the market’s ability to proficiently allocate scarce resources. In other word, the stock market will lose its informational efficiency. Informational efficiency is defined as at any given time, stock prices fully reflect all available information of the market. Thus, no investor has an advantage in predicting a return on a stock price because no one has access to information not already available to everyone else. Identifying the relationship or informational efficiency thus can be used to correct the current economic stabilization policies. Therefore, the issue of whether stock prices and macroeconomic variables are related or not have received considerable attention. This paper provides empirical evidence of the relationship between stock prices with each of the macroeconomic variables: exchange rate, inflation rate, money supply variables and so on. The knowledge of the prevailing relationship between stock prices one the one hand, and micro variables like market...
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...well as economic analysis? Introduction Though Central Bank is viewed as one of the primary mechanisms of macroeconomic stabilization there are a number of arguments about other areas of Central Bank’s involvement. This paper will explore the different areas, including the role of Central Bank in effecting monetary policy and intervening body in exchange rate trades, Central Bank as a Last Lender Resort (LLR), and Central Bank as a regulatory body of the financial sector. Prior to further discussion, it is important to stress that the role of Central Bank and the scope of its involvement may vary due to the effect of different legislations and the presence of various stakeholders. Thus, US Central Bank does not act as a regulatory body of the financial sector (Driffill et al., 2005), whereas the intervention activity of Japan Central Bank requires the approval of other governmental bodies (Fujiwara, 2005). This paper discusses the importance of Central Bank's publications of economic forecasts and other information related to Central Bank's views of the further state of macroeconomic trends. The discussion shows that this information is highly important for other market players and forecasting agencies as it reduces the information asymmetry. The role of Central bank in macroeconomic stabilization Chandavarkar (1996 cited in Geraats, 2002) claims that macroeconomic stabilization is the pivotal role of the Central Bank. The stabilization duties include such aspects as the...
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...Macroeconomics project R&D Expenditures Macroeconomics analyze all of the markets in the world and the aim of the macroeconomics lecture generally is, to teach us how to think economy as a whole. For the macroeconomics homework we picked the news from the Guardian newspaper. We will show the effects of the decreasing UK government’s R&D expenditures with IS-LM and AS-AD models. First of all we will explain the effect of decreasing UK government’s R&D expenditures with IS-LM model. IS-LM curve is a macroeconomic model that graphically represents two intersecting curves. It focuses short run relationship between output and interest rate in the goods and financial markets. The IS curve is downward sloping and LM curve is upward sloping. If government decreases the spendings IS curve shifts left. Both output and interest rates decrease in the economy. LM curve doesn’t shift. If we look which way the investment change in the short run, it has different dimensions. Initially when government expenditures decreases cause decrease in output or income. So it can reduce the investment. In the second place decreasing government expenditures may lead to decrease in interest rates. Lower interest rates would make borrowing cheaper and should encourage firms or governments to invest. That’s why investment may increase. In our case we have seen that decreasing UK Government’s R&D expenditures cause both government and business investment fell. In summary according...
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...Supply and Demand Microeconomics and macroeconomics are both very similar and they both effect economic decisions made by people. Microeconomics focuses on the individual, or the household, and how they make financial and economic decisions. Macroeconomics focuses on the economy, and people, as a whole. It studies what society does financially as a whole. I read the exercise and I also watched the video, but this paper will focus on the video we watched about the apples and pears. There were several microeconomic principles presented in this video. One example of a principle of microeconomics is the increase in demand of apples after apples were said to cure cancer. This causes more people to want to purchase apples. This increase in demand increases the price as well, and the increase in price will cause the supply to go up to. The video also showed an example of how supply can shift as well. In the first example, there was a new invention that helps to prevent apples from disease. This helps the growers out immensely and they are now able to produce and sell more apples. This change in supply causes the supply curve of apples to increase to the right. This shift in quantity supplied causes the price of apples to drop. Both of these are examples of microeconomics. The decision on whether to purchase apples is up to the consumer, or individual, and is based on the price of apples or the benefits of apples. A consumer will always buy the cheaper product or they...
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...Economics Multiple Choice. Choose the one alternative that best completes the statement or answers the question. 1) Economics is best defined as A) the study of how people make choices to satisfy their wants. B) the study of individual self—interests. C) the study of how government can most efficiently raise funds by taxation. D) the process by which goods are sold in free markets. 2) Microeconomics is defined as that part of economic analysis which A) studies the behavior of the economy as a whole. B) includes the problems of inflation and unemployment. C) studies the individual decision making by households and firms. D) concerns international finance and exchange rates. 3) In his book “An Inquiry into the Nature and Causes of the Wealth of Nations,” economist Adam Smith argued that individuals A) tend to act in an altruistic manner. B) always consider the impact of their actions on the welfare of others. C) are motivated by self—interest. D) are generally not concerned with economic questions. 4) When studying individuals’ economic behavior, economists assume that A) individuals understand the rationale for all their actions. B) individuals act as if they were rational. C) only educated people act as if they were rational. D) self—interest is of limited relevance in predicting an individual’s actions. 5) Holding all variables but one constant and assessing the impact of the one variable which has changed is an example of using A) the ceteris...
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...1.4 The macroeconomic impacts of oil price shocks 1.4.1 A short history of a controversial topic Since the 1973 OPEC (Organization of Petroleum Exporting Countries) oil embargo, the role of rapid, unanticipated increases in oil prices has been a topic of intense interest, among both economists and the lay public. Considering the magnitude of widespread national recessions during the 1970s, the controversy surrounding research on the macroeconomics of oil price shocks may seem surprising: why would anyone doubt the capacity of oil price shocks to cause the major movements in GDP (Gross Domestic Product) which have been observed in so many countries? Possibly most important in fueling the controversy is the small share of GDP that oil and its close substitutes have comprised in most economies: 1.5% to 3% prior to the 1973 episode. Experienced macroeconomists doubted that even a sizeable shock to such a small part of the economy could have the observed effects. Second, the 1973 episode itself was not a clean experiment because a number of other major factors were emerging at the same time. The world economy was just getting off the post-Bretton Woods fixed exchange rate regime. A number of countries, including the United States, was teetering on the brink of recession at the time of the 1973 shock; in the United States in particular, monetary policy tightened right around the time of the 1973 shock. Separating these effects and deciding the role ...
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...Papers Vol.3 No.2 June 2007, Pp. 362 - 375 362 Stock Return Volatility in Emerging Equity Market (Kse): The Relative Effects of Country and Global Factors Mohammad Faisal Rizwan* and Safi Ullah Khan** This paper focuses on the role of macroeconomic variables and global factors on the volatility of the stock returns in an emerging market like Pakistan. The paper uses two multivariate models, multivariate EGARCH and Vector Auto Regressive (VAR) models to investigate the effect of exchange rate, interest rate, industrial production, money supply, Morgan Stanley Capital International (MSCI) World Index and 6-months LIBOR on stock prices in Pakistan’s equity market. The estimate shows that domestic macroeconomic variables have varying degrees of importance in explaining the relationship between stock returns and volatility in Karachi Stock Exchange. The empirical results also show that the two global factors, MSCI World Index and 6-months LIBOR, variables used in this paper explain the stock returns in KSE. An important conclusion drawn from the results is that macroeconomic variables exhibit asymmetric effects on returns volatility. Overall, the results show that Pakistan’s stock market is partially integrated as shown by the significant role of both country and global factors. Field of Research: Finance 1. Introduction Studies on the link between macroeconomic variables and stock returns are broadly divided into two groups based on the level of market integration. The first strand...
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...Chapter 5: Government Expenditure and Revenue by Ooi Soon Beng After studying this chapter, you should be able to understand: Public Budget Budget Deficits and Surplus Expansionary and Contractionary Fiscal Policy Discretionary and Automatic Fiscal Policy National Debts and Its Issues and Misconceptions Problems with Fiscal Policy : Macroeconomics According to Keynes, government has to intervene to stabilize the economy. Stabilization can be achieved in part by manipulating the Public Budget to increase output and employment or to reduce inflation. The Budget outlines the government’s taxation and expenditure plans for the coming fiscal year. The Ministry of Finance are responsible for the preparation of the budget. Sources of Revenues: Direct taxes on individuals and companies Indirect taxes on goods and services (gasoline, alcohol, tobacco, etc) Non-tax revenue (stamp duty, licenses, permits, etc) Malaysia: Sources of Revenue (in RM) 1990 2013 2014 Direct Taxes 35.2% 56.5% 59.1% Indirect Taxes 36.7% 16.6% 17.2% Non-Tax Revenue 28.0% 26.9% 23.7% Total Revenue 29,521m 207,913m 224,094m Source: Ministry of Finance Categories of Expenses: Operating Expenditure (emolument, pensions, debt servicing, grant to states, subsidies, supplies, scholarships, etc) Development Expenditure (security, social services, economic services, expenditure ...
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...Fundamentals of Macroeconomics JoRenie Armstrong ECO/372 March 23, 2015 Yohannes Mariam Fundamentals of Macroeconomics Fundamentals of Macroeconomics economic principles apply and affect the entire economic system that encompass the world. Macroeconomics directly impact every part of our government and every individual’s quality of life. The health of the nation’s economy affects our economy. A few areas that determine economic health are the gross domestic product (GDP), gross national product (GNP) the unemployment rate, the inflation rate, and taxes. The Principle areas of Macroeconomics covered in this paper examines the flow of resources between three entities - government, businesses, and individual households. Their interconnecting relationships of how various economic activities connect and affect one another verbalized from the author’s perspective. Households Daily acts, such as buying groceries has an enormous impact on our economy. Purchasing groceries on a regular basis directly affect the GDP. Consumer spending is a driving force of a nation’s economic health. The Gross Domestic Product (GDP) defined is the final monetary measurement of a country’s production activities, of goods and services, bought by the end users in a given period. Purchasing groceries for consumption is part of the GDP collection process. This factor is how individual household purchases affect the nation’s economy. In times of a recession, consumers spending decreases. Consumers...
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...Part 1 Fundamentals of Macroeconomics Macroeconomics puts a focus on how decisions made both on an individual level and by corporations and government has Macroeconomics is known as the study of behavior in relation to the aggregate economy and studies economy-wide issues such as changes in unemployment, income levels and many various other factors (Investopedia, 2012). This paper will define many of the terms used when it comes to dealing with macroeconomics and cover a few examples of economics can effect different situations on both government levels and individual levels. Gross domestic product (GDP) A major term to understand is the gross domestic product which is also known as the GDP. The GDP is the market value of services and final goods that are produced in the economy and the stated price in the given year (Colander, 2010). As people produce goods and earn income from selling those good, the economy grows. Economic growth usually means that a person income increases from one year to the next. Real GDP The real GDP is an inflation adjusted measure shows the value of all goods and services and is being shown in a base year pricing (Colander, 2010). The real GDP is sometimes also referred to as the constant price. To calculate what the real GDP is, a price index is created that measures how much a price level has risen during a year and it is compared to the previous year. This is then divided by the nominal GDP and multiplied by 100 (Investopedia, 2012)...
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...Macroeconomics Chapter 1 What Is Macroeconomics? 1.1 How Macroeconomics Affects Our Everyday Lives 1) Macroeconomics is the study of A) the economic issues which affect individual well-being and individual firms' profit levels. B) the economic issues which affect foreign and domestic prices of related goods and services. C) inflation and poverty at the level of the household. D) the economic issues which affect the nation's total income, employment, and output. Answer: D Question Status: New 2) Political incumbents often gain or lose re-election because of a strong or weak economy. Which of the following is an exception to that rule? A) Al Gore B) George H.W. Bush C) Jimmy Carter D) Herbert Hoover Answer: A Question Status: Previous Edition 3) The "Big Three" concepts of Macroeconomics are A) profits, liquidity, and sustainability. B) unemployment rate, inflation, and economic growth. C) asset rebalancing, markups, and profitability. D) federal budget, foreign trade, and quantitative easing. Answer: B Question Status: New 4) Economy with no productivity growth is called the A) zero-sum society. B) zero-growth society. C) export-led society. D) doomed-to-fail society. Answer: A Question Status: New 5) The inflation rate is the A) measure used to calculate the price level. B) measure used to calculate the cost of borrowing money. C) percentage increase in the average level of prices. D) percentage increase in the average...
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...approved in 1990. Its main objective was to help restore the Philippines' creditworthiness by reducing the destabilizing pressures exerted by an excessive debt-service burden. The government, having inherited a huge debt service obligation, formulated a debt restructuring program for the country and a request for debt-relief from creditors, with assistance from the Bank and the IMF. Several events helped improve the Philippines' creditworthiness. Three of them are particularly relevant to the operation. First, the government adopted a program of deep structural and macroeconomic reform. Second, it reduced the debt stock by about $650 million equivalent, or about 2.3 percent of its outstanding debt at the time, using Bank and IMF financing to buy back $1.46 billion of debt from commercial banks at 50 percent discount. And finally, by signaling confidence in the Philippines' commitment to sound macroeconomic reform, the Debt Management Loan opened up international financial markets for the country. However, the program's success also led to a new problem. It encouraged new loans and other inflows of capital, which eventually became a major source of monetary problems and instability. The resulting increase in inflation forced the government to rein in the economy, suppressing growth; the currency tended to appreciate and the new loans tended to substitute for public sector savings. Clearly, in debt restructuring exercises, foreign creditors must give only enough assistance...
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