Reference no: EM132339576

Macro Economics - Firms & Markets

Overview: You are asked to prepare a report to help a company decide whether to expand to a foreign country, the company who commissioned the report would like to be informed about the macroeconomic conditions.

Report should not be more the 1800 words including tables, figures and diagrams. Excluding appendices, footnotes and references.

Chose a country, make sure you can find the data to answer the questions.

Macroeconomic Background (5 Questions):

1. Find GNP/GDP data for the last 5 years. Plot the growth rate. Compute total factor productivity (TFP) and plot the results for that period. Show how the TFP numbers are calculated according to the formula derived in class. (You may use published TFP numbers, but are still required to show how they are being derived.)

2. What is the earnings yield (inverse of the price-to-earnings ratio) in the domestic stock market? is this number compatible with the performance of the economy as analyzed in the previous question?

3. Find data for the price level and calculate the rate of inflation for the last 5 years. What was the nominal interest rate? What was the real interest rate?

4. Find money supply data for your country. Can you find correlations between the money supply and the rate of inflation?

5. What was the exchange rate 5 years ago and what is it now? (by exchange rate we mean the price of the foreign currency in terms of domestic currency; be sure to state the units of the exchange rates that you post.)

Has the domestic currency appreciated or depreciated during this period?

What was the real appreciation/depreciation?

Did interest rate parity hold during this period? If not infer in what direction (above or below) did expectations deviate from actual changes in the exchange rate? (for those who are aware of the difference, the question is about the uncovered interest parity.