Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Macroeconomics Expert

From the lower left graph of Fig. it can be seen that there is a time lag associated with an oil price shock and its subsequent effect on unemployment. The results show that for the following year there is no real diversion from the trend and therefore in the short term, unemployment is not significantly effected by an oil price shock. However throughout the medium term and into the long term the unemployment rate is shown to be up to 0.5% higher as a result of the oil price shock. The trend does not stabilise throughout the five year period and therefore it can be drawn that from an oil price shock there is a significant lasting effect on the unemployment rate in the UK.

Finally from the top right graph from Fig. exchange rates seem to follow economic theory. Mankiw (2010) explains that a reduction in the net exports of an economy will result in a depreciation of that economy's exchange rate. Whilst the graph shows that the exchange rates are initially above the normal level following an oil price shock, towards the end of the short term, throughout the medium term and into the long term the real exchange rate has depreciated by two basis points and does not revert back to the original trend throughout the period.

In summary, oil price shocks do draw out great responses from three of the five macroeconomic indicators tested. GDP, inflation and interest rates were all proven to be Granger caused by oil prices indicating that there is a significant relationship between them. In this paper, the results are negative for UK economic performance. The Cholesky impulse response functions show long periods of economic recession and fluctuating levels of inflation for the following four to five years post oil shock. In addition to this, unemployment and exchange rates are also both negatively impacted by a shock in oil prices. Like interest rates, these impacts appear long lasting and do not revert back to their previous trend throughout the five year period. Therefore following a shock in oil prices this model shows that the overall economic performance of the UK will suffer greatly throughout the short and medium term, and will stabilise only in the long term although the economy may be left with a high level of long term unemployment.

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9537483

Have any Question?


Related Questions in Macroeconomics

Question suppose the utility function for a consumer is

Question: Suppose the utility function for a consumer is given by U = min{X, 3Y}. A) Sketch 3 indifference curves for this consumer B) Given the utility function and the associated ICs, what type of goods are X and Y? Th ...

Principles of macroeconomics assessment - supply and demand

PRINCIPLES OF MACROECONOMICS ASSESSMENT - Supply and Demand, and Equilibrium Analysis Assume: Demand Curve: Q D = 80 - 10P; and Supply Curve: Q S = 10P 1. Using the above information, complete the schedules for Quantity ...

Question - find an article that discusses in depth the

Question - Find an article that discusses in depth the state of the current U.S. economy or how much the U.S. economy is growing. Discuss GDP growth, unemployment or U.S. exports. You must use either: New York Times Busi ...

Question - the supply and demand curves for a given

Question - The supply and demand curves for a given commodity are given by S(p) = 0.02(1 + p) 2 and D(p) = 10e -0.02 p where S(p) and D(p) are quantities and the price p is measured in dollars. Use the Malaren's series e ...

Question instruction there is a dataset attached called

Question: Instruction: There is a dataset attached called "caschool", it is an excel file. I also upload the description of the data. It is the explanation of the data. If you don't read it you won't be able to answer qu ...

Question - the space below shows the budget constraint

Question - The space below shows the budget constraint between food (F) and non-food consumption (X). This household has $800/month to spend on the two goods, the price of food = $4/unit and PX = 1. Label both axes and b ...

Question develop a 12-slide microsoftreg powerpointreg

Question: Develop a 12-slide Microsoft® PowerPoint® presentation including detailed speaker notes or voiceover including the following: Describe the intervention and detail its history. Analyze the arguments for governme ...

Introductory economics assignment -three problem-solving

Introductory Economics Assignment - Three Problem-Solving Questions. Question 1 - Australia and Canada have a free trade agreement in which, Australia exports beef to Canada. a. Draw a graph and use it to explain and ill ...

Question - consider a market with 100 consumers each

Question - Consider a market with 100 consumers. Each consumer would like to buy at most one unit and is willing to pay up to 10$. There is an incumbent firm that already operates in the market and a potential entrant fi ...

Analyze the concept of exchange rateexplain how the dollar

Analyze the concept of exchange rate. Explain how the dollar price of Euros is determined. Identify a factor that can increase the dollar price of Euros. Identify a factor that can decrease the dollar price of Euros. Exp ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As