Reference no: EM132408757
ECO202Y1Y, Macroeconomics Theory and Policy, University of Toronto, Canada
The purpose of this assignment is to test the Keynesian Theory of Consumption, for the country of your choice. You need to write a well-structured research report about the whole process of acquiring and refining your date, applying the theory, estimation, and interpreting the results.
In order to help you, your paper 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 of time not shorter than 25 years and as recent as possible. For each year, find following time series data for your country from reputable sources (World Bank, IMF, UN, or local statistical agency of your country):
1- Real private consumption and real disposable income in terms of local currency directly (not changing from US$).
2- Population of the country for each year.
Present the raw data in form of tables. You can add graphs that you think are informative for your audience. Discuss the sources of your data, nature and description of the data and the assumptions and calculations that you may use to construct the needed data.
2)- Then using the data in previous section, try to estimate the consumption function, like this:
C = co + c1Yd
Where C and Yd are the per capita consumption and per capita disposable income. In order to estimate the above relation, use the example in the posted spreadsheet. After organizing your data in the columns of an excel spreadsheet, use LINEST function to estimate co and c1, and other statistics. If you have problem working with LINEST function, search YOUTUBE, for the tutorials. You can learn it within a few minutes, using the tutorials and my example file. All estimated coefficients and statistics should be fully presented. The computer output of the estimation should be included.
Note: You can add more variables to the equation in above, if you have a good reason for it. Then estimate the new equation to verify your theory.
3)- Discuss the size and sign of coefficients, and the statistics of the model (like R2).
4)- General organization, quality of analysis and presentation, creativity and elaboration of the paper and also proper referencing.