Part A: Theory and policy
- Read http://www.abc.net.au/news/2015-02-13/rba-glenn-stevens-economic- testimony-to-parliament/6090624, describing the reasons for Australian monetary policy. Compare and contrast the approach to monetary policy for each economy. How effective does monetary policy appear to be in each economy? Give reasons for your answer.
Part B: Interest rates and monetary policy: data collection, presentation and analysis
For Part A of the assignment you will investigate the role of the interest rate and monetary policy in the macroeconomy. You will collect, present and analyse GDP growth, investment growth, inflation rate, unemployment rate and interest rate statistics for Australia, Greece, and the USA:
- Collect annual data for the real GDP growth rate, real gross fixed capital formation growth rate, the unemployment rate and the consumer price index (CPI) for the three economies for the years 2001 to the most recent year available for any series from the World Bank database. http://databank.worldbank.org/data/views/variableselection/selectvariables.aspx# . Define each variable. Present the data in a table and present a chart for each variable; that is four charts.
- Collect the international official interest rate data for Australia, for Greece (note, Greece is in the Euro zone) and the USA from http://www.rba.gov.au/statistics/tables/index.html#interest-rates (Table F13). Calculate the annual average for each of the three series from the monthly data for the year from July to June e.g. for the first year in your series, July 2000 to June 2001, and so on for the later years. Add these data to the table for the other variables above. Present the interest rate variables in one chart.
- Present a separate chart for each of the three countries for all variables, that is three charts. What do you conclude about the relationship between the official interest rate and GDP growth in each country; between the interest rate and investment growth; the interest rate and unemployment; and the interest rate and inflation? For instance are they rising, falling, moving in opposite or same directions?…….
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