Estimate the Phillips curve and Okun’s Law for the country of your
choice and write a well-structured research report about the whole process of acquiring and refining your
date, estimating, and interpreting the estimated coefficients based on the theoretical background of your
models and empirical implications of the estimated equations for the country of your study.
In order to help you, your article should include, among other things, following steps. Please note that your
final paper must have an essay form, with complete structure from introduction to conclusion and references
with an internal coherence. These steps are just to help you to organize your paper, and not to be treated
like questions/answers mechanically.
In order to find help for writing, referencing methods, avoiding plagiarism, please consult with following
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:
t t 1 Yt π − π = a + b −
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):
(Y Y) πt − πt−1 = α t −
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 R2
. (15 points)
5- In this part you should estimate the Okun’s Law by estimating an equation like this:
t t 1 yt u − u = a + b g −
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:
u u (g g) t − t−1 = −β yt − .
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 R2
. (10 points)
7- General organization, quality of presentation, creativity and elaboration of the paper and also proper
referencing: (20 points)
Administrative issues: - The project should be done by each student independently and alone. You should let me know
following information by email (to [email protected]), by Feb. 20, 2022: - Your name and student ID Number.
- A list of six or seven countries from the next page list, in order of your preference. I will choose
and let you know the country that you should work on. You cannot change your country, after my
approval. - The quality of analysis always matters more than quantity. But your assignment could be around 2000
words (around 8 pages), excluding the tables, graphs, and references. - You should report all your references. As you know plagiarism is a violation that is prosecuted based on
the university rules. In suspicious cases, I may decide to check your assignments by Turnitin. - The assignment must be submitted before March 27, at 9pm, sharp, through Quercus. The assignment
must include the names and student ID Numbers, on the cover page, otherwise your marks may not
be recorded correctly.
.
List of Countries
A: Algeria, Argentina,
B: Brazil, Bulgaria, Burkina Faso
C: Cambodia, Cameroon, Chile, Colombia, Czech Republic
E: Egypt, Ethiopia
G: Ghana, Guatemala
H: Honduras, Hungary
I: India, Indonesia, Iran, Israel
J: Jordan
K: Kenya
M: Madagascar, Malawi, Malaysia, Mali, Mexico, Morocco, Mozambique, Myanmar
N: Nepal, Niger, Nigeria
P: Pakistan, Paraguay, Peru, Philippines, Poland
R: Romania
S: Senegal, South Africa, Sri Lanka, Sudan
T: Thailand, Tunisia, Turkey, Tanzania
U: Uganda, Uruguay
V: Vietnam
Z: Zambia, Zimbabwe