EC224: Economic Theory & Applications
Second Assignment
This assignment is in three parts. You will complete all questions for a country of your choice. If this is your second attempt, the country must be different from the first one that was allocated to you.
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.
You are reminded that in accordance with University policy work submitted within two weeks after the submission deadline may result in the mark awarded being capped. All marks and results are provisional and subject to confirmation by the relevant exam board. The assignment should be around 2000 words in total (10% leeway), all charts, diagrams and table should be your own and clearly labelled and everything taken from other sources must be referenced in line with the University policy (see on-line referencing handbook for full details).
Question 1
Compare the growth of money and nominal GDP for your country for 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. You get source the money data from the World Bank and the GDP data from the IMF World Economic Outlook.
Criteria Weight Notes
Source data 20% Poor: Lack of data
Good: Reliable and referenced
Understand theory 40% Poor: Confusion and mistakes
Good: Understanding in own words
Excellent: Critical use of theory to explain what is seen in the data. Firm conclusions
Re-base the data 20% Poor: No re-basing or mistakes are made
Good: Rebased and evidence of understanding
Excellent: Series re-based and other comparisons made.
Present evidence 20% Poor: Sloppy, mistakes, lack of care.
Good: Well-presented and clear.
Excellent: Innovative, creative and interesting.

Question 2
How well does the Phillips Curve help you to understand the evolution of unemployment and inflation in your country 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.
Criteria Weight Notes
Source data 10% Poor: Lack of data
Good: Reliable and referenced
Understand theory 40% Poor: Confusion and mistakes
Good: Understanding in own words
Excellent: Critical use of theory to explain what is seen in the data. Firm conclusions.
Regression analysis 40% Poor: No regression. Mistakes and lack of understanding
Good: Regression carried out and interpreted
Excellent: Regression carried out, clear comments made on the diagnostics.
Present evidence 10% Poor: Sloppy, mistakes, lack of care.
Good: Well-presented and clear.
Excellent: Innovative, creative and interesting.

Question 3
Find data on the distribution of income by quintile for your country 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) a copy of which is available to download from the assessment folder on StudentCentral.
A useful guide on how to calculate the gini coefficient from quintile data can also be found in the same place.
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.
Criteria Weight Notes
Calculation of gini coefficients etc. 30% Poor: incorrect data used, incomplete, mistakes, methods not explained
Good: correct data used, correct calculations, methods shown
Excellent: + presented very clearly, Lorenz curves graphed
Understand theory 50% Poor: Confusion and mistakes
Good: Understanding in own words
Excellent: Critical use of theory to explain what is seen in the data. Firm conclusions.
Present evidence 20% Poor: Sloppy, mistakes, lack of care.
Good: Well-presented, clear, with sensible conclusions
Excellent: Innovative, creative and interesting.

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