Assignment: Macroeconomics Theory and Policy

The purpose of this assignment is to estimate the Phillips curve and Okun's Law for the country of your choice and write a well-structured research report about the whole process of acquiring and refining your date, estimating, interpreting the coefficients, and discussing the theoretical implications of the estimated equations for the country of your study compare to reality of the country.

In order to help you, your article should include, among other things, following steps. Please note that your final paper must have a complete structure from introduction to conclusion and references with an internal coherence. These steps are just to help you to organize your paper, and not to be treated like questions to get your answer mechanically.

1- Choose a period time not shorter than 20 years and as recent as possible. For each year, find the following time series data for your country from reputable sources: Inflation rate, unemployment rate, and real GDP (in terms of local currency). A description of the used data sources should be included.

2- Present the data in form of tables and graphs that you think are informative for your audience. Discuss the sources of your data, nature of the data and the assumptions that you may use to construct the needed data.

3- Use "How to Estimate" posted on the portal to estimate the Philips Curve by estimating an equation like this:

π_t - π_t-1 = a + b Y_t

All estimated coefficients and statistics should be fully presented. The computer output of the estimation should be included.

4- Change the estimated equation in to standard Phillips Curve like below to find α and natural level of output for your country (Note that I used Y instead of u in this version of the Philips Curve):

π_t - π_t-1 = -α(Y_t - Y‾)

Discuss the size and sign of these values. Discuss the statistics of the model, like R².

5- Use "How to Estimate", to estimate the Okun's Law by estimating an equation like this:

u_t - u_t-1 = a + b g_yt

Where, gyt is the growth rate of real GDP. All estimated coefficients and statistics should be fully presented. The computer output of the estimation should be included.

6- Change the estimated equation in to standard Okun's Law like below to find β and g, which is called normal growth rate: u_t - u_t-1 = -β(g_yt - g) .

Discuss the size and sign of these values. Discuss the statistics of the model, like R².

7- General organization, quality of presentation, creativity and elaboration of the paper and also proper referencing:

Administrative issues:

- The project should be done in groups of 2. You should work with the same team and on the same country as assignment#1. If for any reason your team doesn't exist let me know.

- As usual, the quality of analysis always matters more than quantity. But your assignment could be around 10 to 15 pages (excluding the references), using letter size paper, double spaced and 12 cpi font size.

- I will not intervene in any inter or intra group problems and issues. If any of your partners drop the course, more likely you have to finish the project by yourself.

List of Countries

A: Algeria, Argentina, Armenia, Azerbaijan

B: Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso

C: Cambodia, Cameroon, Chile, Colombia, Congo, Costa Rica, Côte d'Ivoire.

D: Dominican Republic

E: Ecuador, Egypt, El Salvador, Ethiopia

G: Gabon, Ghana, Guatemala,

H: Honduras

I: India, Indonesia, Iran, Israel

J: Jamaica, Jordan

K: Kenya, Korea

L: Lebanon, Lesotho, Libya

M: Madagascar, Malawi, Malaysia, Mali, Mexico, Morocco, Mozambique, Myanmar

N: Namibia, Nepal, Nicaragua, Niger, Nigeria

P: Pakistan, Panama, Paraguay, Peru, Philippines

S: Senegal, Singapore, South Africa, Sri Lanka, Sudan, Syria

T: Thailand, Tunisia, Turkey, Tanzania

U: Uganda, Uruguay

V: Venezuela, Vietnam

Z: Zambia, Zimbabwe.