Problem-
Why did some countries fare better in the recent financial crisis? Can early warning indicators help predict which countries will be most vulnerable in an economic crisis such as the one that occurred in 2008-09?
From the data found in the Excel sheet attached, we want to focus on the following five countries:
• Australia
• China
• Iceland
• Japan
• United States
For each of the 5 countries, we now want to construct some indicators measured in 2007 or before that might help predict why some countries had adverse experiences to the crisis. (Note: some of these concepts have not yet been covered in class but in this assignment, you are merely being asked to examine relationships between variables and not required to explain them conceptually.)
• GDP growth rate over the period 2003 to 2007 (take the average over the years between 2003 and 2007).
• GDP per capita in 2007.
• Exports as a percentage of GDP in 2007.
• Imports as a percentage of GDP in 2007.
• Average inflation rates over the period 2003-2007 (take the average over the years between 2003 and 2007).
• Growth in money supply over the period 2003-2007 (take the average over the years between 2003 and 2007).
• Real interest rate in 2007.
• Foreign direct investment in 2007.
• Current account balance in 2007.
• Country's reserves as a percentage of GDP for 2007.
(a) Insert these values into the table below. You can round your answers to two decimal places where necessary. (Hint: in order to compute the average, you can use the excel function "=average()" to do the computations).
Table 1: Independent variables that might explain the change in GDP between 2008 and 2009
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Country
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GDP growth 2003-2007
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GDP per capital 2007
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Exports 2007 (% of GDP)
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Imports 2007 (% of GDP)
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Average Inflation Rate (2003-2007)
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Average money supply growth rate (2003-2007)
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Australia
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China
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Iceland
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Japan
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United States
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Country
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Real interest rate 2007
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Foreign direct investment 2007
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Current account balance (2007)
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Reserves 2007
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Reserves 2007 (as % of 2007 GDP)
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Australia
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China
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Iceland
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Japan
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United States
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(b) Using the data compiled for the five countries, which of the indicators listed in Question 2 appear to help explain why some countries did not experience adverse experiences to the crisis. Justify your choice or explain your argument.
Additional Information-
The problem is belongs to Economics and it is describe the GDP of the five selected countries between 2003 and 2007, just before the financial crisis had occurred. Areas of GDP such as GDP growth rate, GDP per capita, exports and imports between 2003 and 2007 and various reserves, etc have been calculated.