Weight: 25% (there are 5 questions worth 5 marks each)
Due Dates:
Part A: 25 March 2016 (7pm) e-submission via Blackboard
Part B: 9 May 2016 (7pm) e-submission via Blackboard
Outline and Instructions: In this assignment you will be asked to do two things. First, forecast certain macroeconomic variables prior to their official release. Second, discuss your forecasts, the significance of the data for the economy and develop an opinion and commentateabout certain economic issues.
The total weight of the assignment is 25% of your final mark. The assignment has two parts. Part A requires you to submit some forecasts. This has to be done before the data is released, so note the submission time for this part of the assignment. Part Bis the main part of the assignment. It contains a number of questions on macroeconomic topics. Many of these can be started immediately. One question, asks you to discuss your forecasts in Part A and how accurate they were. This obviously needs to be done after the data is available.
In submitting Part A answer the required questions and post the whole assignment to Blackboard. In submitting Part B, include your earlier answers for Part A and submit the whole document to Blackboard.
To successfully complete this assignment you will need to undertake some research. Your lecture notes and textbook will be useful in this regard, particularly in understanding the definition of the variables to forecast in Part A. For Part A and B it is highly recommended that you make use of the information sources listed in the Appendix in developing your thoughts on the domestic and global economy. Add any resources you cite to the reference list at the end of this document. Place your answers to the question in grey boxes. Adjusttheir size as necessary but make sure you keep to the word limit.
1. Part A: Macroeconomic Forecasting
Question A.1.
Provide forecasts for the variables listed below by inserting a number in the grey box. (Note: this question will be evaluated as part of Question B.1)
Country
Variable Data source or where the data can be found Release or forecast date Forecast
Australia
CPI (y/y % chg. in 2016Q1) ABS (http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0)
27 Apr 2016 0.5% chg.
Unemployment Rate (%of labour force, seasonally adjusted, March 2016) ABS (http://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0)
14 Apr 2016 5.9%
ASX200 Share Index (http://www.bloomberg.com/quote/AS51:IND)
27Apr 2016
(end of day) 5100
Australian Dollar vs US Dollar (No. of USD to buy 1 AUD) (http://www.bloomberg.com/quote/AUDUSD:CUR)
27Apr 2016
(end of day) 0.78
2. Part B: Macroeconomic Analysis
Question B.1:
Discuss how your forecasts compared with the actual numbers, any errors and why? What are the implications of the data for fiscal and monetary policy makers in Australia and in particular, is the data likely to lead to a change in monetary or fiscal policy settings? (5 marks, 200 word limit)
Question B.2.
Briefly outline how the global economy, and recent global economic events, have impacted and are impacting on the Australian economy? (5 marks, 200 word limit)
Question B.3:
Referring to Figure 1.7 in the textbook (Dornbusch, Bodman, Fischer and Statz, 2013) and lecture notes; at what point do you think the Australian economy is at in the business cycle?In your answer outline whether you think the economy is performing above or below potential GDP, what the normal level of GDP and CPI growth is, what you think is the natural rate of unemployment (NRU) and why. (5 marks, 200 word limit)
Question B.4:
Discussone major risk to the Australianeconomyfrom the demand side and one major risk on the supply side. That is, discuss two events which, were they to occur,would negatively affect aggregated demand (AD) and aggregate supply (AS) respectively leading to higher unemployment. Also, discuss your assessment of the probability of each event occurring.(5 marks, 200 word limit)
Question B.5:
What is your expectation regarding the performance of the Australian economy over the next 10 to 20 years with regard to GDP growth?How will it perform compared with the previous couple of decades? Discuss with reference to the growth drivers such as; technology, population and ageing, physical capital, human capital and natural resources? (5 marks, 200 word limit)
References (list any references you use here)
3. Marking Rubric
The rubric below provides a basis for grading your responses to the questions in Part B. Note marks will be deducted for answers that exceed the word limit. Part of the challenge is to write clearly and succinctly.
Grade (out of 5) 0 to 1 mark 1.5 to 2.5 marks 3 to 5 marks
QuestionsA.1 and B.1 Forecasts are not provided, late or exhibit errors of understanding. Analysis provides limited insight. The task has mostly been completed but there are some poor forecasts and limited discussion of forecasting errors and the policy implications of the numbers. Provides forecasts which are reasonably accurate. A coherent story regarding any forecast errors and a strong discussion of the policy implications of the numbers is provided.
Question B.2 Shows little appreciation for recent global events and the impact on the domestic economy. Provides a reasoned but not fully rounded discussion of the global economy and its impact on the domestic economy. Demonstrates a comprehensive understanding of recent global economic developments and their impact on the domestic economy.
Question B.3 Not completed or poorly completed with limited insight. Limited or unconvincing understanding of the state of the business cycle and weakly argued estimates of underlying growth, inflation and the NRU. Provides insight into the state of the business cycle and credible estimates of underlying growth, inflation and the NRU.
Question B.4 Not completed or poorly completed with limited insight. The economic risks have not been clearly thought through and argued and/or the probabilities do not appear plausible. Plausible economic risks are outlined and the probabilities are well argued.
Question B.5 Not completed or poorly completed with limited insight. The discussion of long run growth is mixed and the argument for their chosen figure could be strengthened. Identifies long run growth drivers and provides a plausible argument for their chosen long run growth figure.
4. References
Dornbusch, R., P. Bodman, S. Fischer and R. Statz (2013), Macroeconomics 3rd edition, McGraw-Hill Education, Australia: Sydney.
5. Appendix: Useful Sources of Information
• Data sources and major institutions:
a) The Australian Bureau of Statistics (ABS) is the major source of economic data in Australia. This can be accessed via their website: www.abs.gov.au.
b) The Singaporean statistics department releases much of the state’s key national data. These statistics can be accessed via the website: www.singstat.gov.sg/.
c) There are a number of international agencies which collect data from various countries and present it in a coherent format. In particular, the IMF, World Bank and OECD sites will be very useful, especially because they also produce forecasts:
• IMF: data from the Oct 2015 IMF World Economic Outlook (WEO) is available here: www.imf.org/external/pubs/ft/weo/2015/02/index.htm.There is an audio-visual presentation which is quite interesting. The WEO itself may also be very useful as it provides discussion and forecasts for most of the countries around the world. The WEO is produced every 6 months so make sure you are looking at the latest one.
• The World Bank: the World Bank produces a Global Economic Prospects document (www.worldbank.org/en/publication/global-economic-prospects). This contains forecasts and discussion of the prospects for a number of mainly developing countries. This is also produced every 6 months.
• OECD: the OECD (Organization for Economic Cooperation and Development) is a group of mainly rich countries. They have a secretariat which puts together macroeconomic projections in their Economic Outlook every 6 months (www.oecd.org/eco/outlook/economicoutlook.htm). They record the presentation which is usually quite interesting.
• The ADB: the Asian Development Bank is another international agency which does a lot of work in the macroeconomic area. There some useful resources on the website (http://www.adb.org/) such as country-specific pages and also detailed economic data (http://www.adb.org/publications/key-indicators-asia-and-pacific-2015).
• Sources of commentary and analysis:
d) One of the best ways to stay informed of economic events is to watch the TV news and read the newspaper. I would particularly recommend watching Alan Kohler who is a very good business commentator that appears on the ABC News each night around 7.20pm. His nightly report is also available here: www.abc.net.au/news/business/kohler-report/.
e) The website: www.dismal.comis useful as it provides a release calendar of economic indicators (www.economy.com/dismal/indicators/calendar/monthly). The website covers all the major economic data releases around the world though much of their material is for paying subscribers. However, it is possible to see a few sentences about some recently covered statistics (e.g. www.economy.com/dismal/indicators/releases/aus_cpi/Australia-Consumer-Price-Index).
f) Bloomberg runs a TV station and has a sophisticated data provision service also has a very good website with a lot of commentary on economic issues. There is an Asian page (www.bloomberg.com/asia) and one for the Americas and Europe too (see the drop down menu in the top right hand corner). I particularly enjoy reading this fellow: www.bloombergview.com/contributors/william-pesek.
g) Almost all the various newspapers in Australia and elsewhere in the world have economic commentators and lots of interesting macroeconomic discussion. Many of the commentators are excellent. I’ve included a list below. Each of these writers tend to focus on their home country and the issues of the day:
• Paul Krugman in the New York Times:www.krugman.blogs.nytimes.com/
• Peter Martinin The Age (Melbourne, Australia): www.theage.com.au/federal-politics/by/Peter-Martin
• Ross Gittins in the Sydney Morning Herald (Sydney, Australia):www.smh.com.au/business/by/Ross-Gittins
• SCMP: the South China Morning Post has a pretty comprehensive business section which can be viewed at: www.scmp.com/business/global-economy
• The Straits Times: the economy section of The Straits Times can be viewed here: www.straitstimes.com/business/economy
h) There are many excellent economic-focused blogs around which provide useful information:
• Macrobusiness: This is an excellent website which has a lot of very interesting material about the Australian and global economy. It is undated daily and the discussion is usually highly relevant to macroeconomic forecasting and thinking about economic risks. However, some of the blogs are only for paying subscribers. The website is here: http://www.macrobusiness.com.au/.
• Major US blogs: There are a large number of excellent economics bloggers in the US. A comprehensive list (with some discussion of the flavour of the blog) can be found here: www.bloombergview.com/articles/2015-02-18/econ-bloggers-take-to-internet-to-hash-out-big-ideas-of-our-age. Some of the particularly influential ones are listed below. But note these do often have a US focus:
i. www.economistsview.typepad.com/economistsview/
ii. www.marginalrevolution.com/
iii. www.bradford-delong.com/