“Choose any one country, assess its current macroeconomic position and discuss what policies have been adopted by the monetary and fiscal authorities in the past year. What should the monetary and fiscal authorities be doing over the next year or so?”
This can be done alone or in groups of up to four people. A note giving further guidance is attached below.
[You can get annual data from 1980 on all major countries from the IMF web site (www.imf.org) by going to “publications”, search for World Economic Outlook and then click on database for the latest WEO, which will be for October 2015. You should not study the whole of the eurozone, rather pick one member country if you wish. The WEO has a discussion by the IMF for all major countries. For the UK you can also read the Bank of England quarterly Inflation Report available on the BoE web site (www.bankofengland.co.uk).
The OECD also publishes assessments of major economies. Be very careful not to copy chunks of material from internet sites or other publications as this will constitute plagiarism. Quotations from other material are fine as long as they are marked as such and the source is clearly stated.]
The work should be typed and around 1500 words in length, and certainly not longer than 2000 words. Charts and tables may be included in addition to this word limit. References should be given to data sources and any other material used. Any direct quotes from source material should be clearly indicated and the source attributed.
The central focus should be on real GDP and its recent history. Is GDP below trend, is there a significant GDP gap? [For major countries, estimates of the GDP gap are available from the IMF, but for others you would have to compare actual GDP with its trend.] Is it positive or negative? If negative, why is demand weak…..is it C, I, G or net trade? Look for other indicators of slack or overheating, what is happening, for example, to inflation and unemployment? If inflation is high the economy may be overheating, but if unemployment is high and rising then the economy may need some stimulus.
What is the state of the balance of payments? Does the economy need some stimulus or some slowing down?
In most countries the dominant issue has been after-effects of the 2008/9 global financial crisis. This has cut demand and led to output falls and higher unemployment. So a sensible focus would be: how has the crisis affected the country in question and what have the authorities done to try to mitigate the effects? What else should now be done?
What have monetary and fiscal policy makers been doing recently? Have there been announcements of tax or spending increases from the government? Have official interest rates been rising or falling? What is quantitative easing (QE) aimed to achieve and how well
has it done? On the basis of your analysis what would you recommend that policy makers should do next? The answer may be “nothing” but that would mean that you think things are as good as they can be.
For information about UK monetary policy you can access the Inflation Report via www.bankofengland.co.uk and you may also find the Bank’s Target 2.0 web site helpful which has a link from the Bank’s home page. UK fiscal policy links can be found via the Treasury web site: https://www.hm-treasury.gov.uk/ Look especially at the November 2015 OBR Economic and Fiscal Outlook and the November 2015 Autumn Statement from HM Treasury.
Data for other countries can be found from the IMF on www.imf.org. Search for World Economic Outlook (WEO) and this will lead you both to IMF assessments and to annual data since 1980 plus latest IMF projections (via WEO database).
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