The Great Recession

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MGMT 673 – Global Economic Analysis

Assignment 1: The Great Recession

 

Due Date

 

This assignment is due by the end of Module 2.

 

Objective

 

The global recession that began in 2008, generally known as the Great Recession, was the worst economic downturn since the Great Depression of the 1930s. The objective of this assignment is a deeper understanding of the relationship between economic indicators and the business cycle. You will track several important economic metrics through this extraordinary recession and recovery.

 

Directions

 

Begin by choosing a country of interest from those listed in Marthinsen Appendix

1-1 (Excluding the United Kingdom as it is provided as an example). Using the International Monetary Fund’s (IMF) World Economic Outlook database, obtain the following economic metrics for the years 2007 to the present: 1. Gross Domestic Product, 2. Investment, 3. Saving, 4. Inflation, 5. Unemployment rate, and 6. Government debt. Data for some countries may be incomplete. If so, please choose another country.

 

For this assignment, begin with an introduction explaining the purpose of the paper and the country chosen. Then, present these metrics graphically so that relationships to the contraction and subsequent expansion in GDP are apparent. Detailed guidance on how to create a graph in MS Excel is provided below. The IMF database allows for several choices for the computation of each metric, so notes to the graph and in raw data should specify what the metric measures, for example, year over year percentage change in GDP. Next, explain how and why each varied during the course of the Great Recession. Determine whether each indicator (except GDP, which is the measure of the recession) is procyclical, countercyclical or acyclical. Did the indicator move as the discussion in Marthinsen (see Exhibit 4-13) suggested? If not, suggest a reason.

 

When interpreting the data, keep in mind that some indicators are computed as a year over year percentage change. If GDP, for example, drops from a 5% year over year increase in one year to zero percent (0%) in the next, then GDP remained unchanged over the two year period. Similarly, some indicators, such as Savings, are computed as a percentage of GDP. If Savings as a percent of GDP showed no change from one year to the next, but GDP declined, then the Savings declined with GDP.

 

The paper should be in APA format. Use an APA style guide such as the Purdue Online Writing Lab. Purdue OWL also includes an APA sample paper which may be helpful. Do a search within the Purdue OWL website for “sample APA paper.” The paper should not exceed four pages excluding a title page and reference list and appendix.

 

The graph of the economic indicators should be placed in the body of the paper for easy reference but the raw data is best suited for an appendix.

 

Creating an Excel Chart Using IMF Data

 

Access the IMF World Economic Outlook (WEO) database with this path: IMF Home/Data and Statistics (top menu)/ World Economic Outlook Databases (scroll down to find) /World Economic Outlook Database (most recent)/Download WEO Data – By Countries/then select the desired country and select the desired metrics in a five step process. Generate the report which may then be downloaded in an Excel compatible format. The database should look like this:

 

 

Here is an example of the report for the United Kingdom.

 

 

The data from the IMF report were then copied and pasted into Excel.  Next, the Excel table was modified by deleting some unneeded columns and a row was added that computes the budget deficit as a percent of GDP.  Here is the result.

 

Subject Descriptor Units            Scale 2007 2008 2009 2010 2011 2012 2013
Gross domestic product, constant prices Percent change 3.427 -0.769 -5.17 1.66 1.117 0.251 1.756
Total investment Percent of GDP 18.195 17.092 14.071 15.016 14.934 14.656 14.382
Gross national savings Percent of GDP 16.009 16.149 12.656 12.323 13.471 10.925 11.045
Unemployment rate Percent of total labor f 5.35 5.725 7.65 7.85 8.1 7.95 7.604
General government revenue Percent of GDP 36.964 37.433 35.561 36.181 36.943 36.806 37.737
General government total expenditure Percent of GDP 39.848 42.449 46.818 46.155 44.729 44.768 43.536
Deficit = revenue – expenditure Percent of GDP -2.884 -5.016 -11.257 -9.974 -7.786 -7.962 -5.799

 

Finally, the spreadsheet was modified to a format suited for creating a line graph.

  2007 2008 2009 2010 2011 2012 2013
GDP 3.427 -0.769 -5.17 1.66 1.117 0.251 1.756
Investment 18.195 17.092 14.071 15.016 14.934 14.656 14.382
Savings 16.009 16.149 12.656 12.323 13.471 10.925 11.045
Unemployment 5.35 5.725 7.65 7.85 8.1 7.95 7.604
Deficit -2.884 -5.016 -11.257 -9.974 -7.786 -7.962 -5.799
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