...Testing Phillips Curve in long run in the US Economy Introduction: Phillips curve is one of the most startling observations made in economics and gained much popularity in 1960s. The inverse relationship between unemployment rate and inflation rate was first observed by William Phillips in 1958 in his study on British economy during the period 1861-1957. For many years this relationship has been used by policy makers to target unemployment and inflation levels. However, in recent times there are various doubts emerging to this concept as there are cases studied where the trade off between unemployment rate and inflation rate can be observed in the long run thus rendering this concept entirely short run in nature? (Phillips, A.W. cited in Ogbokor, 2005).It would be crucial yet interesting to test the validity of traditional long run Phillips curve as it used as a policy guideline and has had many controversies revolving around it for the same. Objective: Phillips Curve in the Long run: Examining the Long run relationship between unemployment rate and inflation rate in United States using univariate analysis (analysis based on descriptive statistics). Methodology: The data used for analysis has 58 observations collected over the period 1952-2008 consisting unemployment rate and inflation rate of US. It has been collected from Bureau of Labour Statistics and Measuringworth.com. We will make use of statistical tools to test the existence of relationship, if any...
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...research for knowledge? A model by definition is “a schematic description of a system, theory, or phenomenon that accounts for its known or inferred properties and may be used for further study of its characteristics”[1] that implies that a model is supposed to be a helping hand while searching for knowledge in any subject. Sometimes however models can appear to be quite confusing as they are to general or too far away from real life situations. So how and in what way models can help and hinder the search for knowledge in natural sciences, human sciences and arts I am going to argue in the following essay. In school we learn all our subjects with the help of models and especially in natural sciences we need them in order to assume what might happen if, say in biology, in a cell there is a lack of oxygen and we know and can explain with a model of a cell and of the respiratory cycle how anaerobic respiration works and what it does and needs. With the help of the model and through logical connecting of facts that the student might already have, he can develop the thought in his or her mind and therefore gain new knowledge about a theoretical process that was proven to take place in the human body. Another model, which however is not as accurate also in Biology is the Sigmoid Population growth curve. It displays the population growth of a species over a period of time that settled in a new place[2]. It is a generalised idea, which does not have to take place but is very likely to...
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...equilibrium and GDP will be increased by an amount equal to the increased spending. Further, the multiplier effect of the government spending, when the government increase spending on purchases it will create more job opportunities. This will increase consumer spending which will encourage private investment spending to meet the demand. In turns that will create more jobs in the economy. The negatives of increasing government spending are as follows. It is very important to remember that government spending to stimulate the economy is not free. The funds are not going to come from thin air. The government has two options to generate the money without increasing taxes, borrowing the money domestically, or from foreign governments. Both cases increase the national debt, or cut some government programs to stimulate others. Borrowing the money domestically, from local investors, will stop these investors from creating new businesses. This will lead to less job creation in the economy. When the national debt increases the future tax rate will increase which will slow the economy in the future. That will lead us to conclude that stimulating the economy by borrowing is a short term solution. While cutting other government programs can be described as taking water from one end of the swimming pool and adding it to the other end. This will not increase the...
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...MACROECONOMICS 2 FINAL EXAMINATION PAPER: SEMESTER | 2012. ,,1 HAVE INSERTED MY RECOMMENDED SOLUTIONS IN BOLD ITALICS AFTER EACH OF THE QUESTIONS ON THIS EXAMINATION PAPER." Question I For this question you can choose to answer either (A), or (B)' but NOT BOTH. A. Assume that the Asset Demand for money is relatively elastic or flat, and that the Investment Demand Curve, is relatively inelastic or steep. Compare and contrast the effect of an increase in Money Supply upon the overall level of economic activity, using both the traditional transmission mechanism, and in the IS'LM model. Are there any major differences between these 2 models? Your answer should include all relevant diagrams. (20 marks IN RELATION TO THIS QUESTION, STUDENTS WOALD BE EXPECTED TO IDENTIFY AND EXPILIIN THE TRADITIONAL TRANSMISSION MECHANISM AND BRIEFLY EXPLAIN ITS CONSTITUENT PARTS; NAMELY MONEY MARKET, THE INVESTMENT DEMAND CARVE, AND FINALLY THE 45 DEGREE LINE PRODUCT MARKET MODEL. THEY WOALD BE EXPECTED TO BRIEFLY DESCRIBE THE EFFECT OF AN INCREASE IN MONEY SAPPLY WHEN THE ASSET DEMAND CURVE FOR MONEY IS RELATIVLY FLAT AND THE INVESTMENT DEMAND CT]RVE IS RELATIVELY STEEP. BETTER ANSWERS WOALD EXPLAIN WHAT THE LATTER 2 SLOPES INDCATE ABOUT THE PARTICULAR MARKETS. ANSWERING THIS QAESTION STUDENTS SHOALD IDENTIFY THE 2 PARTICULAR WEAKNESSES THAT CHARACTERISE THE TRADITIONAL TRANSMISSION MECHANISM. THE ARTE THE 2 PROBLEMS OF TryHEN INTERDEPENDENT VARIABLES AND...
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...University College of Business DOI: 10.1353/jda.0.0095 For additional information about this article http://muse.jhu.edu/journals/jda/summary/v044/44.2.bashar.html Access Provided by Bangladesh University of Professionals at 05/29/11 5:42AM GMT THE ROLE OF AGGREGATE DEMAND AND SUPPLY SHOCKS IN A LOW-INCOME COUNTRY: EVIDENCE FROM BANGLADESH Omar H.M.N. Bashar Deakin University, Australia ABSTRACT This paper explores the relative role of aggregate demand and supply shocks in affecting the output level and inflation rate in a low-income country vulnerable to various economic shocks. The study uses Bangladesh data, and following Cover et al (2006), employs a modification of the BlanchardQuah (BQ) approach, in which the two shocks are allowed to be correlated. Strong evidence is found for the hypothesis that aggregate demand and supply shocks are interrelated in Bangladesh. For the case in which causality is assumed to be running from demand to supply shocks, it was found that an independent supply shock plays significant role for fluctuations in inflation, which was absent in the standard BQ model. The results suggest that a tightening of monetary policy may lead to an adverse effect on the long-run growth potential and some supply-side policies may be required to supplement contractionary monetary policy in combating inflation in Bangladesh. JEL Classifications: E3, O11, C32 Keywords: Aggregate Demand and Supply Shocks, Blanchard-Quah Decompositions, Monetary Policy, Bangladesh...
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...9/19/2012 A Tour of the World A Tour of The World A Tour of The World Chapter 1: A Tour of the World CHAPTER 1 Prepared by: Fernando Quijano and Yvonn Quijano Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States Table 1-1 1996–2006 (average) 2006 2007 2008 3.1% 3.4% 3.3% 2.1% 2.5% Output growth rate Unemployment rate 6.2 5.0 4.6 4.6 4.8 Inflation rate The unemployment rate 4.0 2.0 2.9 2.6 2.2 Output growth rate: annual rate of growth of output (GDP). Unemployment rate: average over the year. Inflation rate: annual rate of change of the price level (GDP deflator). 3 of 18 Chapter 1: A Tour of the World The inflation rate The period 1996-2006 was one of the best decades in recent memory: The average rate of growth was 3.4% per year. The average unemployment rate was 5.0%. The average inflation rate was 2.0%. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States 4 of 18 1-1 The United States Has the United States Entered a New Economy? Should We Worry About the U.S. Trade Deficit? Figure 1 - 2 Figure 1 - 3 Rate of Growth of Output per Hour in the United States Since 1960. The U.S.Trade Deficit Since 1990 The trade deficit increased from about 1% of output in 1990 to about 6% of output...
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...online at the Department of Economics website. Jayla Heller, the Department’s secretary has been kind enough to go through all of the frustration and hard work to put the guide in the appropriate format and put it online. To her goes my gratitude. The department, neither school, nor the professor make anything whatsoever from this Guide. In fact, the department’s budget and the professor’s own resources are used in the writing of the Guide, and the numerous draft copies that are produced in the revisions of this document. Like the sign in the Mom and Pop bait shop on Big Barbee Lake says, “This is a non-profit organization, wasn’t planned to be – it just worked out that way.” Well, actually it was planned to be a non-profit enterprise in this case. The professor also wishes to acknowledge the fact that several students have proposed changes, improvements, caught errors, and helped to make this document more useful as a learning tool. Naturally, any errors of omission or commission are those of the professor alone. i Introduction & Use of Guide This Course Guide is provided to assist students in mastering the subject matter presented E202, Introduction to Macroeconomics. The commercially available student guides and workbooks are notoriously inadequate and are simply of little value. At several institutions, prepared course materials are made...
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...unemployment, it would lead to inflationary tendencies. This is because when demand aggregate outstrips the available supply, the disequilibrium would push the prices up. Low and declining unemployment level means wages would also rise and thus price rise caused by demand pull will also bring in the cost push factors to sustain the inflationary conditions. Inflationary tendencies can be thwarted when the aggregate demand pulls are matched by increased productivity and investment. But in the times of inflationary expectations, the investment slackens as the future prospects of earnings deteriorate and thus the inflation continues to spiral. Short- run Philips Curve do give a fair explanation of unemployment and price-rise, and assuming decline in unemployment is associated with increase in growth rate, the short-run Philips curve also explains the short term relationship of growth rate and inflation at low level of...
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...Common Approaches 1. Apply a model or law (e.g., Phillips curve, Okun’s law, etc.) to more recent data. 2. Extend what is known for the U.S. to other countries (emerging, developing or Eastern European). Examples: 1. Outsourcing: Do firms that outsource tend to do better? Or why they outsource? 2. Trade deficit: What causes the huge US trade deficit? 3. Twin deficits: Is there a link between the trade deficit and the government budget deficit? 4. Foreign exchange: What has caused the recent drop of the US dollar? 5. Oil shocks: Have oil shocks led to recessions in the US or elsewhere? 6. Growth: Why some countries are rich while others poor? 7. Election: What determines an election outcome? 8. Big Mac Index Finance/Management/Accounting Common Approaches 1. What affects stock performance of different firms or over time? 2. Firm performance? Some Issues 1. Any link between the economy and the stock market? 2. How does monetary policy affect the financial markets? 3. Any link between stocks and bonds? Microeconomic/Socioeconomic/Marketing Issues General Approach: Apply any theory, model or concept to firms, people or markets. Some Issues 1. What affects the demand (or price) for a product? 2. Does money buy happiness? 3. Any link between market price (or profit) and quality? 4. Evaluate the effects of a government program. Tips: • Extend (and replicate) the work of an existing study. • Search for one issue from other classes (or your...
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...Vietnam National University, Hanoi UNIVERSITY OF ECONOMICS AND BUSINESS Macroeconomics Home work 1. Measuring a Nation’s Income Section 1: Multiple choice questions 1. In producing a sweater, a man who shears sheep pays a farmer $4 for a sheep. The shearing shop sells the wool to a knitting mill for $7. The knitting mill buys the wool and makes it into a fine fabric and sells it to a sweater-making firm for $13. The sweater-making firm sells the sweater to a clothing store for $20, and the clothing store sells the sweater, gift wrapped, for $50. What is the contribution to GDP of the previous sales transactions? a. $4. b. $44. c. $50. d. $94. 2. Susie grows corn in her backyard garden to feed her family. The corn she grows is not counted in GDP because a. it was not produced for the marketplace. b. it is an intermediate good which Susie will process further. c. the corn has no value. d. it reduces the amount of corn she will buy at the store. 3. Which of the following would be counted in U.S. GDP? a. the purchase of an historical house b. the purchase of a haircut c. the purchase of a $1000 government savings bond d. the value generated when you wash your car in your driveway 4. If private investment increased by $50 billion while GDP remained the same, which of the following could have occurred, all else being the same? a. Consumption spending decreased by $50 billion...
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...Graduate School of Development Studies INFLATION IN VIETNAM OVER THE PERIOD 1990-2007 A Research Paper presented by: Bui Thi Kim Thanh (Vietnam) in partial fulfillment of the requirements for obtaining the degree of MASTERS OF ARTS IN DEVELOPMENT STUDIES Specialisation: Economic of Development (ECD) Members of the examining committee: Dr. Karel Jansen Dr. Lorenzo Pellegrini The Hague, The Netherlands November, 2008 1 Disclaimer: This document represents part of the author’s study programme while at the Institute of Social Studies. The views stated therein are those of the author and not necessarily those of the Institute. Research papers are not made available for circulation outside of the Institute. Inquiries: Postal address: Institute of Social Studies P.O. Box 29776 2502 LT The Hague The Netherlands Kortenaerkade 12 2518 AX The Hague The Netherlands +31 70 426 0460 +31 70 426 0799 Location: Telephone: Fax: 2 Table of Content Chapter 1 INTRODUCTION 1.1 BACKGROUND AND STATEMENT OF THE PROBLEM The period 1980-1984 The period 1985-1989 The period 1990-2007 1.2 OBJECTIVE AND SCOPE OF THE PAPER 1.3 APPROACH OF THE PAPER AND DATA 1.4 STRUCTURE OF THE PAPER Chapter 2 THE THEORETICAL AND EMPERICAL FRAMEWORK 2.1 THEORETICAL CONSIDERATION 2.1.1 Demand-pull inflation 2.1.2 Cost-push inflation 2.2 APPLICABILITY OF THE THEORIES IN THE CASE OF VIETNAM 2.3 EMPERICAL EVIDENCES Chapter 3 ANALYSING INFLATION IN VIETNAM AN OVERVIEW OF VIETNAM’S ECONOMY...
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...capital market in market economies. Its importance lies in the fact that it provides short term investment opportunity for the private investors and long term financing for firms at low cost. Governments use it as a low cost financing instrument for deficit budgets. The domestic bond market is a source of huge liquidity in the financial market which eventually expands the size of the domestic capital market. Theory has it that, a combination of domestic and foreign participation in the domestic debt market generates liquidity, and lowers the national yield curve. This paper examines these theoretical assertions and relations as it applies to the Nigerian capital market. Using data from the Central Bank of Nigeria, we use the methodology of applied financial econometrics to analyse the various relationships. Keywords: Domestic bond market, bond market liquidity, capital market size, national yield curve, Nigeria Eurobond, capital market, foreign participation. Introduction This paper essentially examines how the growth of domestic bond market and foreign participation in the same market function to impact the development and growth of the Nigeria capital market and enhance financial stability. Peiris (2010) noted, “A vibrant and deep local currency domestic bond market promotes financial stability and economic growth”. Also a good and functioning domestic bond market is useful in the conduct of monetary policy. A functioning and stable domestic bond market in...
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...BRITISH UNEMPLOYMENT AND MONETARY POLICY Dr Sushil Wadhwani Member, Monetary Policy Committee Bank of England Speech to be delivered to the Society of Business Economists on 2 December 1999. I am extremely grateful to Damon Clark, Joanne Cutler, Mark Dean, John Henderson and Duncan Melville for their help and advice on this work. I have also learnt a great deal by talking to William Brown, Richard Layard and Stephen Nickell. Ian Bond, Phil Evans, Paul Fisher, Mike Joyce, DeAnne Julius, Mervyn King and John Vickers provided me with helpful comments on an earlier version. The views expressed in this paper are personal and do not necessarily reflect any views held by either the Monetary Policy Committee or the Bank of England. 2 INTRODUCTION Many economists use a notion like the so-called ‘natural’ rate of unemployment (or the allied concept of the non-accelerating inflation rate of unemployment – the NAIRU, hereafter) in thinking about the labour market. Of course, the NAIRU is extremely difficult to measure, and, often, there is significant disagreement about where it is at a given moment in time. As I discuss below (in Section 2), since 1992, British economic forecasters have displayed a tendency to over-predict the level of unemployment, while simultaneously also over-predicting inflation. It is likely that these forecast errors have come from having been too gloomy about the NAIRU. In Section 3, I discuss econometric evidence suggesting that, in the 1990s...
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... 111114111E10, 11 I ,1I IEY9 1 1 1,iiiii1mlonl -2- FLUE GAS DESULFURIZATION: COST AND FUNCTIONAL ANALYSIS OF LARGE - SCALE AND PROVEN PLANTS by Jean Tilly Submitted to the Department of Chemical Engineering on May 6, 1983 in partial fullfillment of the requirements for the degree of Master of Science in Technology and Policy ABSTRACT Flue Gas Desulfurization is a method of controlling the emission of sulfurs, which causes the acid rain. The following study is based on 26 utilities which burn coal, have a generating capacity of at least 50 Megawatts (MW) and whose Flue Gas Desulfurization devices have been operating for at least 5 years. An analysis is made of the capital and annual costs of these systems using a comparison of four main processes: lime, limestone, dual alkali and sodium carbonate scrubbing. The functional analysis, based on operability, allows a readjustment of the annual costs and a determination of the main reasons for failure. Finally four detailed case studies are analyzed and show the evolution of cost and operability along the years. Thesis Supervisor: Dr. Dan Golomb Title: Visiting Scientist -3- ACKNOWLEDGEMENT a I would like to express my sincere thanks to Dr. Dan Golomb for his guidance, support and contribution to this thesis. appreciated working with him. I have very much I also want to thank Jane Schneckenburger for the time and care she took in correcting and editing this thesis. Finally, Alice Giubellini...
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...depends largely on the productivity of its workers, which in turn depends on the education of its workers and the access its workers have to the necessary tools and technology. Prices rise when the government prints too much money because more money in circulation reduces the value of money, causing inflation. Society faces a short-run trade-off between inflation and unemployment that is only temporary. Policymakers have some short-term ability to exploit this relationship using various policy instruments. Quantity of Clothing Produced the frontier), point B is an inefficient point (inside the frontier), and point C is an infeasible point (outside the frontier). Microeconomics is the study of how households and firms make decisions and how they interact in markets. Macroeconomics is the study of economy-wide phenomena, including inflation, unemployment, and economic growth. 2. An example of a positive statement is “a higher price of coffee causes me to buy more tea.” It is a positive statement because it is a claim that describes the world as it is. An example of a normative statement is “the government should restrain coffee prices.” It is a normative statement because it is a claim that prescribes how the world should be. Many other examples are possible. Parts of the government that regularly rely on advice from economists are the Department of the Treasury in designing tax policy, the Department of Labor in analyzing...
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