ECON2004: Money and Banking - Research Essay Writing Assessment Answer

Subject Code: ECON2004

Research Essay Writing Assessment Answer

Assignment Task: 1. Presentation of Research Essay Prepare a report that flows logically, presenting discussion and data in an orderly way. Discussion in the report must refer to data, which should appear as appropriately-numbered or -referenced illustrations (usually Tables and Figures). Illustrations must be highly legible to a reader. They should be appropriately captioned. There should be no illustrations without accompanying analysis or discussion in your report. The report need not necessarily be organised in a stylistic essay format. Embed illustrations were analysed in the body of the report, or attach them as part of a Data Appendix. It is also essential to attach a readily legible and easily verifiable Data Appendix reporting the data set, data sources and the definitions used to calculate variables. Clearly, provide any reader with the information needed to easily check the data at the source. Before beginning work on the Essay, read the essay preparation guidelines on Blackboard. 2. Data Collection and Display Collect and display in an orderly way the following annual data for the study period. You can use as a starting-point the sample Excel spreadsheet from Blackboard and modify it according to your approach to the Essay. Attach your data compilation to the Essay as part of the Data Appendix, separately from any Tables or Figures that you construct using combinations of the data from your initial collection. 2a. Nominal GDP for your chosen country, GDP (e.g., GDPARG if your name begins with, "A". 2b. Narrow money (currency plus demand deposits) (M1). 2c. Broad money (narrow money plus time deposits or quasi-money) (M2). 2d. Consumer Price Index (CPI) and/or GDP deflator. All must have a common base year of 100 (or 1.0). Obtain these indexes, if available, and then use the most appropriate available for the relevant calculations in Part 4 below. 2e. Real GDP (i.e. GDP at constant prices). If unavailable directly from various data sources, then calculate real GDP as nominal GDP divided by the GDP deflator with base 1.0. 2f. The deposit rate of interest, I D, YC. This is known as the nominal deposit rate of interest. 2g. The loan rate of interest, IL, YC. This is known as the nominal loan rate of interest Your calculations below should use consistent data, so try to obtain indexes that have the same base year. Furthermore, money data should be denominated in the domestic currency of your chosen country, but each of your calculations must use consistent data. 3. Data Processing and Conclusions Using your collected data, prepare the following calculations and graphs and draw conclusions in the form of appropriate responses to the questions posed. 3a. Calculate the narrow or broad money growth rate in percentage terms. Plot it for the study period and describe the nature of any apparent trend(s) and fluctuations. 3b. Calculate the percentage rate of inflation, ? YC based on the CPI or the GDP deflator. Plot ? YC for the study period and describe the nature of apparent trends and fluctuations. 3c. Calculate the percentage growth rate of real GDP for the sample period. Plot it and describe the nature of any trends apparent in the plot and fluctuations. 3d. Plot inflation against either narrow or broad money growth, displaying money growth on the horizontal axis and inflation on the vertical axis. Calculate the correlation coefficient between money growth and inflation. Optionally, if you are familiar with regression analysis, estimate a regression line using statistical or econometric software. How well does your plot support the theoretical relationship between the variables, e.g. money growth and inflation? 3e. Calculate the correlation coefficient between either narrow or broad money growth and real GDP growth. Use economic theory to interpret your calculated coefficient. 3f. Plot the real deposit rate of interest, rD, YC over the study period. Define rD, YC as I D, YC minus ? YC (see 2f. and 3b. above). Discuss the nature of the plot's trend(s) and fluctuations. 3g. Plot the real loan rate of interest, r L, YC over the study period. Definer L, YC as IL, YC minus ? YC (see 2g. and 3b. above). Discuss the nature of the plot's trend(s) and fluctuations 4. Using information, say, from a government or central-bank website of your chosen country and other publications, write a brief discussion for that country of each of the following: 4a. The structure and performance of the banking/financial system over the study period. Include a discussion of the ownership, management and composition of commercial banks and of nonbanking financial institutions. Note any significant changes since the 2007 global financial crisis and/or responses to the ongoing European Union and Eurozone crises (distinguish between the EU and the Eurozone). 4b. The key regulatory and supervisory measures of the banking system. Include a discussion of measures undertaken since the 2007 global financial crisis and the ongoing crises in the European Union and the Eurozone. 4c. If your chosen country has any Islamic banking and financial institutions, provide a brief summary of the nature and working of these banks and their overall performance vis-à-vis conventional banks. For example, the UK or Britain has a highly developed Islamic banking and finance sub-system, your discussion of the banking system of this country would be better if you include this part of the financial system. If your chosen country does not have an Islamic banking and financial sub-system, then you can ignore this question. 4c. The objectives and instruments of choice in the conduct of monetary policy for price stability. Explain the reasons behind the choice of any particular monetary-policy strategy and discuss whether there were changes in the strategy of monetary policy in the chosen country over the study period. 4d. Discuss the extent to which monetary policy has been successful in keeping inflation low and stable in your chosen country. 5. How much did you learn from this empirical exercise about the policies and issues of a country with respect to the money, banking and finance and related matters? Briefly outline your views on the use of empirical monetary economics to learn about systemic monetary-banking problems in a global context.

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