Coursework (Group Project). Total Score: 100 Points, which has a 15% weighting on the final mark of this module.

Release Date: 17Marah 2023, 5:00 p.m., on Learning Mall (Friday)

Submission Due Date: 5 May 2023, 5:00 p.m., on Learning Mall (Friday)

This assignment (group project) assesses the learning outcomes of “E” defined in the module specification and counts towards 15% of final mark. The students would organize and present information using appropriate statistical techniques to evaluate the economies during business cycles.

This assignment focuses on business-cycle facts discussed in the lectures. The students would calculate the Business-Cycle Statistics for the poor, emerging and rich economies. Each group comprising of 5 students (or 4-depending on the actual number of students in Week 3) would select total 5 countries, including 2 poor (Least developed countries), 2 emerging economies and 1 rich economy, as given below in Table 1, discussed in the lectures. If the group is uneven like 2/3 students left, they would then select 3 countries from each category. The selection of countries should be completed by the end of Week 6 and shared with the module leader for confirmation. Each group should have at least 3 different countries for the macroeconomic analysis.

The students would analyse the business-cycle statistics at the annual frequency starting from 1980 to 2020. The minimum number of observations should be 30for this macroeconomic analysis. Download five major macroeconomic indicators namely output (real GDP), private final household consumption, investment (capital formulation), government spending and trade (export and imports). The data can be downloaded from WDI, IMF, and other potential sources, as discussed during the lectures. Convert all the data in the natural logarithm of realper capital terms.  Attach  your  tables  in  Appendix  in  the  submission  file,  showing  the  series  after transformation, with clear explanation using a section called Data sources and construction before attempting all the questions. You are required to perform the following tasks, providing clear explanation for each task.

a.   Plot the components of aggregate demand (AD) as percentage of GDP over time. Copy these graphs in your word file, using footnotes under these graphs for clear presentation of information from the macroeconomic data.                                               (15 marks)

b.   What do you observe about the share of each component of AD in the output in the rich countries than in the emerging economies?                                                   (15 marks)

c.   You would now employ two alternative measures of the cyclical components, namely, log-quadratic  detrending   and  Hodrick-Prescott  (HP)  filter  with  the   smoothing parameter 入 = 100. Make the graphs of the cyclical component (output gap) for each economy and analyse the periods of recessions and expansions.      (20 marks)

d.   Calculate the volatility (standard deviation)  of output in the poor, emerging and rich countries based on two measures of quadratically detrended in natural logarithm and HP filtering detrended in natural logarithm. Which countries have more volatile output? Discuss how the detrending method influences the volatility of the cyclical component of output.       (25 marks)

e.   Calculate the relative consumption volatility  using the two measures of the cyclical components obtained in part c. What do you observe about the consumption smoothing in the poor and emerging economies than in the rich countries?                   (25 marks)

Table 1. List of Countries

Coursework Requirements

•   Symbols and equations are encouraged to present your information from the macroeconomic data.

•   Please   attach  the   cover   sheet   and   submit  your   PDF   file  before  the aforementioned deadline. Late submissions will incur penalties according to the XJTLU  Code  of Practice  on  Assessment.  There  is  a  5% point  mark deduction for any lateness at all (even 1 min); an additional 5% point deduction for each day of the late submission. Weekend days count in this penalty too. The maximum penalty is 25% points.