MAE203 - The Global Economy Assignment - Deakin University

Assignment Task

Purpose

Upon completion of this assignment, you will acquire proficiency in interpreting macroeconomic data, employing concepts covered in this unit that are essential for real-world policy-making decisions.

Additionally, you will demonstrate your comprehension of the subject matter by applying analytical knowledge to address pertinent questions. This task offers opportunities to gather, graphically present, and interpret macroeconomic data (GLO1 and GLO3 & ULO2). You will gain the ability to elucidate and apply critical macroeconomic concepts within a global framework (GLO1 and GLO4 & ULO1). Through this assignment, you will enhance your research, comprehension, application, evaluation, and presentation skills, which are vital for success in professional settings.

Context/Scenario

For this task, assume you are an economist employed within a policy institution or a company, and your primary responsibility is to gather, analyse, and interpret data pertaining to various economic indicators and trends. By understanding the intricate relationships within the economy, you derive meaningful insights that inform strategic decision-making and policy recommendations and contribute to the formulation of effective policies.

Assessment Questions

Question 1

Go to the FRED website and collect annual data from 1960 to

2019 of the “Expenditure-side Real GDP, at chained purchasing power parity (2017 USD)” for the following 6 countries: US, Italy, Germany, Spain, Kenya, and Nigeria. For the same six countries, and the same time interval, collect data on “Total Population”.

1. Using these data, compute real GDP per capita and plot the time series for each
2. For each economy, compute the ratio of real GDP per capita relative to that of the US. Do the data support the prediction of convergence? Explain your

Question 2

A. Go to the Australian Bureau of Statistics website (https://w abs.g ov.au/), and collect the following data, from Jan 1991 to Jan 2024, at monthly frequencies:

From Table 14b in “Statistics/Labour/Employment and Unemployment/Labour Force, Australia, detailed”, collect data for:

• Unemployed total; Persons; Seasonally Adjusted
• Long-term unemployed; 52 weeks and over (1 year and over); Persons ; Seasonally Adjusted
• Long-term unemployed; > 52 weeks and under 104 weeks (1-2 years); Persons ; Seasonally Adjusted
• Long-term unemployed; > 104 weeks and over (2 years and over); Persons ; Seasonally Adjusted

B. Now go to FRED and download the following data for the US economy, from Jan 1960 to Dec 2023, at monthly frequencies:

• All employees, Total Nonfarm (seasonally adjusted);
• Number of Unemployed for less than 5 weeks (seasonally adjusted);
• Unemployment Level (seasonally adjusted)

a. Explain why, assuming that workers neither enter nor exit the labour force, with monthly data the following relation holds:

s × e_!1 = u ^s(1)

where u ^s are workers unemployed by less than one month, e_!1 is total employment in the previous month, and s × e_!1 are workers that were employed the previous month and become unemployed within the last month.

b. Explain why, assuming that workers neither entry nor exit the labour force, the following relation holds:

∆u = u ^s − f × u!₁ , (2)

where u ^s  are workers unemployed by less than one month, u ₁ is total unemployment in the previous month, and f × u _!1 are workers that were unemployed the previous month and become employed within the last 4 weeks.

c. Using the data series for total unemployment with duration below 5 weeks and the series for total employment, compute the job separation probability s at each date, using the relationship in equation (1).

d. Using the series on total unemployment and that on total unemployment for less than 4 weeks, at each date compute the job finding probability f using the relationship in equation (2).

e. Plot the series for the job separation rate s and the job finding probability f in two graphs. Discuss and interpret possible patterns and relationships that you find in these data.

Question 3

Using the AD-AS model, explain the RBA assessments of what is going on in the Australian economy and how the RBA sees the economy developing. Explain the rationale behind the RBA decision to increase the cash rate since May 2022 and its effect; explain the RBA assessment of the current conditions of demand, supply, and the labour market, and how the RBA expects demand, supply, and the labour market to evolve.

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