Assignment
1. In the "Problem set 4 data.xlsx" file, the worksheet for Question 1 contains historical Debt-GDP ratios and GDP growth rates for United States and France. They are taken from the HAP "RR-keycolumns" dataset.
a. Calculate the average GDP growth rate across both countries by each of the four Debt-GDP categories (0-30%, 30-60%, 60-90%, Above 90%) by employing the same weighting approach used by Reinhart and Rogoff.
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Debt-GDP Category
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Average of dRGDP, US and France
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0-30%
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30-60%
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60-90%
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Above 90%
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b. Explain in a few sentences the major problem with the Reinhart and Rogoff weighting approach.
c. Calculate the average GDP growth rate in each of the four categories using the more conventional weighting approach (i.e., the one employed by Herndon, Ash,andPollin), and in 2-3 sentences, discuss the differences you find between the two methods.
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Debt-GDP Category
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Average of dRGDP, US and France
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0-30%
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30-60%
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60-90%
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Above 90%
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2. In the "Problem set 4 data.xlsx" file, the worksheet for Question 2 contains data on wage growth (all private employees) and core inflation (CPI for wage earners and clerical workers, not seasonally adjusted, "all items minus food and energy") for the Inland Empire.
a. Report the average inflation rate and average wage growth, 01/2009-09/2017. Record your answer to2 decimal places
b. Estimate a regression model where inflation rate is the dependent variable and wage growth is the independent variable. Interpret the value of the slope coefficient.
c. Assess the statistical significance of the linear relationship between the inflation rate and wage growth at alpha=0.05. What is your conclusion?
d. Discuss your results from an economic standpoint in 2-3 sentences. Does what you found in parts b and c make sense? Why or why not?
Attachment:- Problem-Set-Data.rar