12 June, 2024
0 Comments
1 category
This assignment is prepared to check your understanding of economic growth and disparities between
countries’ levels of development based on empirical evidence. You are expected to extract the data
for this purpose of analysis from relevant credible sources. Originality and clarity in your work are
highly valued. This work accounts for 20% of your total grading of the course.
PART ONE
Long-run Economic Growth
Extract the data for GDP per capita of all sovereign countries for selected years of 1960, 1990 and
2023 from global databases (like the IMF or World Bank) and perform a convergence data analysis
based on the following questions. You can use any data analysis programming language that you
are convenient with for this term paper. You can also use the programing language which we used in
the class, Gretl, accessible for free download at http://gretl.sourceforge.net .
Note: Major economic events like periods of economic/financial crisis, pandemic, globalisation,
industrialization, policy shift, reforms, tech revolution, etc. during the years 1960 to 2022 can be used
as a benchmark for your convergence analysis.
In this work, focus on the following key contents:
- Introduction
● Discuss Long-Run Economic Growth
● Will the poor countries catch up to rich countries by growing faster? - Background
● Provide a summary statistics table for all countries for the years from 1960 to 2023.
● Select 10 sample countries from the data (5 poor and 5 rich) and explain what important key
historic or economic issues have happened during the years under consideration and how is
this reflected in their per capita GDP, inflation, unemployment rate and the policy measures in
these countries during this time? Note, the major economic shocks to consider during this
time could be financial crisis, pandemic, war, political instability, hyperinflation, etc. - Data Analysis
● Using data of GDP per capita provided in the dataset, plot histograms of GDP for all the years
between 1960 and 2023 and describe how the distribution of income evolves. If there are any
outliers, omit them. In a case where you encounter any outlier, then provide economic intuition for
evaluating these countries as outliers.
● Calculate the Growth rate of GDP per capita for each of the countries in the years under
consideration. Show boxplots of incomes for all the countries in each year. What happened? Is
there any evidence for convergence? Discuss the notions of conditional and unconditional
convergence in this regard (Hint.: Use logs instead of levels).
● Split the data into two groups of poor and rich. The split should be done according to the median
income in 1990. Then show boxplots of incomes for both groups in each year. What happened? Is
there any evidence for convergence? (Hint.: Use logs instead of levels. Start with splitting the
sample: poor in 1960, 1990 and 2023, then the same for the rich. Plot boxplots for each). - Extract the GDP, employment rate, investment, education, political stability or other socio-political,
institutional and economic factors for all the economies. Run the regression analysis both for the
conditional and unconditional convergence for a sample of developed countries and developed
countries, each separately and an aggregate analysis for the global economy. The selection for the
development level categories can follow regional divisions or international organization membership,
etc…. (For e.g. OECD, Western Economies, OPEC, BRICS, etc) . Plot the respective convergence
analysis scatter plots depicting the convergence behaviour. (Use the average per capita GDP growth
between 1990 and 2023 as a dependent variable and GDP growth rate in 1960 as the independent
variable for the unconditional regression analysis. For the conditional convergence, use additional
explanatory variables in addition to the GDP growth rate in 1960 ).
NB:
a) Unconditional convergence: (e.g. for the years between 1960 – 2000)
ΔGDP2000-1980 =α + βΔGDP1960
lnGDP2000-1980 =α + βlnGDP1960
b) Conditional convergence (e.g. for the years between 1960 – 2000)
ΔGDP2000-1980 =α + βΔGDP1960 +γX1960
where X1960
is a set of country-specific controls (education, fiscal and monetary policy, competition
level, etc.) – we compare countries with similar starting characteristics - Discussion and Implications
Explain the structure of the data provided and how it characterizes the countries under consideration
over the years that are taken into account. Using your own words, explain why you believe that the
poor countries in the data can (cannot) catch up with the rich countries? Your argument should be
based on the convergence analysis you made from the data. You can support your argument by citing
relevant works that are in line with your analysis. - Conclusion
In summing up your analysis; provide a summary of the main points in your paper in connection with
the macroeconomic theories covered in the class.
PART TWO
Based on the evidence observed in part one of this project, assess the monetary and fiscal policies of
selected countries by focusing on the major economic shocks.
In this work, focus on the following key points. - Fiscal and Monetary policy: Discuss how fiscal and monetary policy can be used in
combination for macroeconomic stability - Stabilization Policies: Based on your macroeconomic data analysis and results under Part
one, look into major policy measures that contributed to the economic performance of the
countries under consideration. Here focus on two different regions (group of countries) based
on the data specification you had for those countries with the same (converging) living
standards(e.g. OECD member countries and non-member countries, or Developed and
Developing countries, or Oil-producing and non-Oil-producing countries, etc. ). - Economic Shock and Policy measures: From the categories under question number 2, select
one sample country from each category. For these two countries, for the years between 1960
to 2023, consider an economic shock that had a significant effect and provide an extensive
discussion about the economic shock. The coverage of the issue can range from the effect of
the economic shock on the local economic units (businesses and household) and further on the
regional or global economy (e.g. the 2008–2009 Financial crisis). Once you identify the
economic shocks, discuss the monetary and fiscal policy measures that the government took
to stabilize the economy from the aforementioned economic shocks. NB: You will be
observing differences in the policy measures depending on the issue and countries under
consideration. Here, see for example the changes to government spending and revenue, public
debt, money supply, interest rate, etc. Here, your analysis should consider the following key
points for each of the countries under consideration.
a. Identify the Issue (the economic shock)
b. Point out the social-economic and political consequences of the economic shock.
c. Use aggregate supply-and-demand analysis to look into the macroeconomic
equilibrium, out-put gap, etc following the shock.
d. Explain the policy measures in place.
e. Outcome: Discus how effective the policy measure has been in stabilizing the
economy from this economic shock. Was the policy measure in place effective? If the
policy measures were not successful, what policy measures could have done better to
address this issue. - Sustainable Development: According to the UN estimate of the World Economic Situation
and Prospects 2023, global GDP growth in 2019 has been as low as 2.3%, the lowest after the
financial crises. Given an increasing income disparity, international trade disputes and policy
uncertainties, increasing global warming, what measures should countries take to attain a
sustainable economic development that takes the future generation into account?
NB: Please, provide a proper citation of any resource used in this work. Use APA Standard for the
format of your final submission
Get Homework Help Now
Category: Uncategorized