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The final and most important part of the methodology is the impulse response functions which will provide the most information with regards to the aim of the project. In order to analyse the variables response to an oil price shock, the VAR has to transform into its Moving Average representation. The moving average representation is necessary to find the impulse response function of the VAR model. In this project I will assess the impulse responses using the typical Cholesky Decomposition. From these responses, future responses of each variable to a shock in oil price can be analysed. Impulse responses display the response of the future values of each variable to a one standard deviation oil price shock, whilst making the assumption that the shock normalises and returns to zero in subsequent periods. Furthermore it is assumed that all other errors are also zero. The underlying thought behind shocking one variable whilst ensuring that the others remain constant is the most effective way of measuring the impact of an oil price shock on other macroeconomic variables. Therefore this section will form the strongest case as to whether natural oil price shocks impact positively or negatively on the key macroeconomic variables in the UK.
Private sector in the circular flow The private sector total income is known as the national income. Because private sector receives the entire return from the factors of pr
Buckley (2009) writes that the UK was in recession for several short periods during this time, which placed further emphasis on researchingrelationships between the price of oil an
Q. Describe the macroeconomic variables? In this section we have summarizes all the macroeconomic variables. The first column denotes the symbol we use for variable whereas col
If there is an increase in the popularity of video games and more companies making video games, then the following is true? A) Sales of the games will be uncertain. B) Price will g
Explain, using the best framework you can think of (based on our class discussion), the effect of a large federal deficit on interest rates.
Q. What do you meant by Investment? When we use the word investment, we characteristically mean 'gross investment'. Fundamentally, gross investment comprises all finished goods
Determine the present worth of a geometric gradient series with a cash flow of $50,000 in year 1 and increases of 6% each year through year 8. The interest rate is 10% per year.
A monopoly has a total cost function of C(Q) = 8Q and faces a market demand Q = 100 ? 2p, (a) calculate the deadweight loss; (b) The firm now spent an amount equal to half of
Company A owns a patent with 15 years of remaining life. Company B is paying royalties to Company A for a license to the patent. It is estimated that royalty payments (end-of- year
discuss four weaknesses of using national income statistics in comparing living standards between two countries
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