Effect on unemployment, Macroeconomics

Assignment Help:

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.


Related Discussions:- Effect on unemployment

What is the meaning of capital - Gross domestic product, What is the meanin...

What is the meaning of Capital - Gross domestic product By capital we characteristically mean manufactured goods which are used to produce other goods and services though are

Process of leave, The yeild of Maize is 73429 Hg/Ha, I need to translate it...

The yeild of Maize is 73429 Hg/Ha, I need to translate it into bu/a, and I konw use 56lbs/bu as test weight. Please leave the process so that I know how to do it, thankyou.

Hypothetical economy, #C=100+0.8yd G=100 T=0.25y X=150 M=0.25yd 1) What is ...

#C=100+0.8yd G=100 T=0.25y X=150 M=0.25yd 1) What is the level of equilibrium national income? 2) Estimate the budget surplus or deficit at the equilibrium national income. 3) Deri

Concept of growth and growth rate, The Concept of Growth and Growth Rate is...

The Concept of Growth and Growth Rate is explained below: Economic growth is rise in an economy’s level of the production of commodities, output or income. We can talk about th

Positive and normative economics-introduction, Positive and normative econo...

Positive and normative economics -introductiion Economic theory or analysis evolves from basic propositions about how individual human beings (or individual economic units) beh

Energy and the Environment, Following on papers by Pacala and Socolow,1 The...

Following on papers by Pacala and Socolow,1 The Carbon Mitigation Initiative at Princeton University, http://cmi.princeton.edu/ has summarized carbon stabilization strategies at

Explain why quantitative measures, Suppose a company is considering two inv...

Suppose a company is considering two investment projects. Both projects require an upfront expenditure of $30 million. The company estimates that the cost of capital is 10% and tha

Spss , (I am providing them below) of Module 5 before beginning this assign...

(I am providing them below) of Module 5 before beginning this assignment.  You will have the opportunity to work through much of the assignment during the group activity for week 1

Demand for the hotel''s rooms, Suppose that a particular large hotel has 79...

Suppose that a particular large hotel has 790 rooms. Furthermore, suppose that the demand for the hotel's rooms are normally distributed with a mean demand of 733 rooms with a stan

Calculate competitive equilibrium quantity, Assume a competitive industry w...

Assume a competitive industry with two hospitals. The hospitals compete in price (such that P = MC ), face the inverse demand curve =10 - Q , and have a constant marginal cost of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd