Macro2

II. Some Stylized Factors, Evidence from Developed Countries
Economic Growth and Business Cycles
An economy is generally in growth despite that sometimes GDP might decrease. The average growth rate of GDP is about 2-3% in current developed countries. Economic growth often appears to be periodically cyclic. This cyclic property is often referred to be business cycles.
II. Some Stylized Factors, Evidence from Developed Countries
Why Important ?
A proper macroeconomic theory should be able to express the stylized factors as we observed from the empiric.
III. National Income Account
There are two approaches to measure GDP
The expenditure approach The income (or value added approach) Theoretically, these two approach should give theroeconomic Variables
Price and Inflation (continued)
There are mainly three statistic indices to measure price level:
• GDP deflator; • consumer price index; • producer price index.
Economic Growth and Unemployment Rate
There has been a significant relation between economic growth and unemployment. Generally a high growth often implies low unemployment. This relation is often referred to Okun’s law. It is named according to Okun, an American economist who find this relation empirically.
I. Macroeconomic Variables
Unemployment and Unemployment Rate
The unemployment is another important problem that is concerned in macroeconomics. Unemployment rate is the measure of the extent of unemployment problem. This is the ratio of unemployment to total labor force.
III. National Income Account
Expenditure Approach to Calculate GDP
This is the way to calculate the GDP via looking at how the final goods and services are used. The GDP composition in terms of their usage: • consumption • investment • government expenditure • net export (export - import) • inventory change
II. Some Stylized Factors, Evidence from Developed Countries
Figure 3: Inflation Rate versus unemployment, 1961 – 2003, US
II. Some Stylized Factors, Evidence from Developed Countries
I. Macroeconomic Variables
Price and Inflation
Inflation is another problem that will be concerned in macroeconomics. Higher inflation may bring problem to the economy. The inflation rate is a measure of the degree of inflation problem. It is referred to the growth rate of price level.
Inflation and Unemployment
If we observe the data before 1970’s, we find a significant trade-off between inflation and unemployment. Higher inflation often indicates low unemployment. This relation is often referred to Phillips curve. It is named after a British economist Phillips who find this relation empirically.
Figure 5: Inflation Rate versus unemployment, 1970-1973， 1984-1993
II. Some Stylized Factors, Evidence from Developed Countries
Figure 6: Inflation Rate versus unemployment, 1974-1983
II. Some Stylized Factors, Evidence from Developed Countries
Figure 4: Inflation Rate versus unemployment, 1961-1969， 1994-2003
II. Some Stylized Factors, Evidence from Developed Countries
I. Macroeconomic Variables
Gross Domestic Product, GDP (continued)
Here，the so-called final product is referred to those products that are not used as intermediate input. For example,... In addition, we shall also distinguish nominal GDP (calculated on current price) and real GDP (calculated on fixed, base year, price).
Macroeconomics
Lecture 2
Macroeconomic Data and Variables
I. Macroeconomic Variables
Gross Domestic Product, GDP
Definition：
• GDP is the total market value of all final goods and services produced by a country within a certain period (a quarter or a year).
Inflation and Unemployment (continued)
Such a deviation from the traditional Phillip’s curve also affects the debates among economists. However, if we organize the data into three samples, we may find multiple Phillip’s curve. This indicates that the Phillip’s curve could be shifted.
II. Some Stylized Factors, Evidence from Developed Countries
Figure 1: The growth rate in real GDP in U.S. 1961-2003
II. Some Stylized Factors, Evidence from Developed Countries
II. Some Stylized Factors, Evidence from Developed Countries
Figure 2: The Growth Rate versus Change in Unemployment Rate
II. Some Stylized Factors, Evidence from Developed Countries
I. Macroeconomic Variables