Reference no: EM131034123 , Length: 6 PPTS

The Semester Project:

First thing you need to do is to form a group of 2 (or 3 in some cases). Then, you will be given a country.

The country I choose to present is Germany

Then you need to find data (preferably quarterly, otherwise annual) for three major macroeconomic variables (inflation, unemployment, growth) for your assigned country. (Hint: IMF, World Bank, and National Statistical Agencies are good sources) You have to present your statistics by using excel graphs, and you should MAKE your own graphs, you will not get any points for graphs copied and pasted from internet.

Then, by using the aforementioned data, you need to come up with economic policy recommendations for monetary policy, fiscal policy and growth policy. There is not one correct answer, but you need to be able to justify your chosen policies in an understandable manner, with the use of economic theory.

Here are some hints:

1- Before you make your recommendation, you might want to compare your country with other countries (maybe with the World average). This will help you to understand whether the inflation or unemployment is too high, or growth is too low in your assigned country.

2- Make sure that your recommendations are consistent! It does not make much sense if you recommend decreasing government spending for fiscal policy and then suggesting to increase it for the growth policy.

3- Not doing anything is also an option. As we will learn later, it is called "non-activist approach". However, you need to convince me in your presentation that this is a viable option.

4- While making a recommendation for the monetary policy, try to remember the effects of money on nominal and real variables in the short-run and in the long-run. Also make sure that you find out whether your country uses open market operations, discount loans or reserve requirements as a monetary policy tool.

5- While making a recommendation for the fiscal policy, you might want to check whether your country has a budget deficit or surplus, as it does not make much sense to advise a country with a huge deficit to increase spending.

6- While making a recommendation in for the growth policy, it might be wise to remember the determinants of productivity (K/L, H/L, N/L and A) and then find data on government spending on education and research (as a percentage of GDP), saving/investment (as a percentage of GDP) as well as trade openness (imports+ exports as a percentage of GDP) and to compare these statistics with similar countries as well as Western countries. This will give you an indication in which areas your country needs a significant change.

7- You can present your work in an informal setting in class during the last week of classes. This will give you a chance to incorporate my feedback into your presentation.