Research Paper, Macro & Micro economics

| March 23, 2015

Project description
This assignment is in three parts. You will complete all questions for the country of Canada. The aim of the assignment is to show that you can test economic theories by using empirical evidence. It is also a test of your ability to present information clearly and effectively as well as understanding of the theory that is being assessed. The graphs, tables and diagrams that you use should be your own and clearly labelled. You must reference the source of the data used.

Question 1
Compare the growth of money and nominal GDP for Canada in the last 10 years. How does this compare with what has happened in the United States? You should discuss what you find in relation to the quantity theory of money and you should re-base the series so that you can visually compare the evolution of the data (graphs). Get the source for the money data from the World Bank and the GDP data from the IMF World Economic Outlook.

Question 2
How well does the Phillips Curve help you to understand the evolution of unemployment and inflation in Canada in the last 15 years? You response should include an overview of the theory, ordinary least squares regression of unemployment and inflation, some comments on the R2, the t-statistic and the residuals as well as some possible explanations if the actual performance of these two variables is not consistent with the theory. You can get the unemployment and inflation data from the IMF World Economic Outlook.

Question 3
Find data on the distribution of income by quintile for Canada and use this to calculate the gini coefficient for two points in time: 1980 (or thereabouts) and 2010 (or thereabouts).
Evaluate what has happened to the distribution of income in your chosen country over this period. For example, what are the possible causes? How do the experiences of your chosen country compare to those of other (similar) countries? What reasons might there be for national differences? And so on.
A useful source of the necessary quintile data is the UNU-WIDER World Income Inequality Database (WIID v.3)
You are encouraged to supplement the gini coefficients you calculate with other measures of inequality, such as P ratios and top income shares, and to draw comparisons between the different data. What story do they tell? Other inequality measures are readily available online from sources acknowledged previously in the course and some may also be found listed in the WIID v.3 database.

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