Macroeconomics Theory and Policy Writing
website: http://www.writing.utoronto.ca/advice/using-sources
1- Choose a period time not shorter than 20 years and as recent as possible. For each year, find the
following time series data for your country from reputable sources (World Bank, IMF, UN, or local
statistical agency of your country of choice): Inflation rate (the GDP deflator inflation rate is preferred),
unemployment rate, and real GDP, in terms of local currency. A description of the used data sources
should be included. (15 points)
2- Present the data in form of tables and graphs that you think are informative for your audience. Discuss
the sources of your data, nature of the data and the assumptions that you may use to construct the needed
data. It is preferable to put the tables and graphs in the appendix. (10 points)
3- You can use the Microsoft Excel LINEST function to estimate a and b coefficients in a different version
of the Philips Curve in an equation like this:
t1tt Yba +=π−π −
Note:
– Instead of the unemployment rate, we have the real output in this version of Phillips curve, so b must turn
out to be positive, not negative.
– You can use any other of statistical software that you know, instead of the LINEST function.
– If you have any problem working with the LINEST function, search YOUTUBE, for the tutorials. You
can learn it within a few minutes, using the tutorials and my example file.
– In order to see one example of using LINEST function for estimations, check the posted example on the
portal.
– All estimated coefficients and statistics should be fully presented. The exact output of the LINEST
function or any other software that you use must be included. (15 points)
2
4- After estimating a and b in the previous part, using algebra, rearrange your estimated equation into the
standard Phillips Curve like below to find α and natural level of output for your country of choice.
Note again: I used Y instead of u in this version of the Philips Curve):
( )YYt1tt −α=π−π −
Discuss the size and sign of α and natural level of output, that you found.
Are they as you expected? Explain. Discuss the statistics of the model, like R 2 . (15 points)
5- In this part you should estimate the Okun’s Law by estimating an equation like this:
yt1tt gbauu +=− −
Where, gyt is the growth rate of real GDP. All estimated coefficients and statistics should be fully presented.
The exact computer output of the estimation should be included. (15 points)
6- After estimating a and b in the previous part, using algebra, rearrange your estimated equation into the
standard Okun’s Law like below to find β and g, which we discussed in the course:
( )gguu yt1tt −β−=− − .
Discuss the size and sign of β and g, that you found. Are they as you expected? Explain.
Discuss the statistics of the model, like R 2 . (10 points)
