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A Summary of Not Your Father’s Recovery
April 26, 2012, 6:07 am
Filed under: Uncategorized

The paper titled “Not your father’s Recovery” written by Kenneth R. Beauchemin, was published in the Federal Reserve Bank of Cleveland, in September 9, 2010. The author proposed different approaches to thinking about the Great Recession based on the Vector-autoregression (VAR). The author demonstrated his way by using some concepts and graphs for the Great Recession.

In his research, the author discussed some general concepts that we should know for Economics. For example, for the Vector- autoregression (VAR), we need to coordinate the economics forecast to know if we use the Vector- autoregression (VAR) to forecast. We should know the past data; before we get regression used by VAR, we should understand some key economic indicators, such as the notion of Real GDP, Unemployment rate and Federal funds rate, etc; for real data from the past, we should have a clear concept for particular data.

The paper also includes some graphs to illustrate the forecast of the variables generated by using VAR. The author asserted some situations in the forecast model, like why some points are not located in the probability band.

The paper concluded that some solutions could explain why some data are out of the probability band and what measures are desirable to recover from the Great Recession. Reference:

Kenneth, R..B. (2010, Sept). Economic Commentary. Not Your Father’s Recovery? Retrieved from http://www.clevelandfed.org/research/commentary/2010/2010-12.cfm



Research Proposal
April 26, 2012, 6:04 am
Filed under: Uncategorized

Introduction

According to the macroeconomic text book, we can find that budget surpluses are contractionary to the economy while budget deficits are expansionary. This phenomenon may happen even in good times in economy, not only during recessions. However, the concept that more government spending can stimulate economic growth is controversial. The policymakers are often good at controlling policies effecting supply and demand when considering the appropriate stimulus measures for growth. If the government wants to affect the level of liquidity in the financial market, it should control money supply. On the other hand, if the government wants to manage the money demand, is should concentrate on the money supply and government spending. The level of government spending change will directly affect aggregate demand in the economy. The Economic growth rate reached its peak in 1984 at 7.1948 percent (Table 1). Then, it increased at a slower rate until reaching the lower turning point in 1991. This recession registered a negative growth of 0.26122 percent as a result of the economic crisis. The sagging economy eventually recovered at a remarkable pace approaching 4.87 percent in 1999 and 3.59 percent in 2004. But, a great recession caused the contraction of the economy by 3.5 percent in 2009. Also it recovered 3 percent in 2010.

Table 1: Selected Macroeconomic Variables

Year

Government Expenditure (billion, dollar)

Money Supply(billion dollar)

GDP

G growth rate

M2 growth rate

GDP growth rate

1981-01-01

966.9

1678.7

6639.592

14.2

9.0

2.541232489

1982-01-01

1076.8

1831.5

6510.62

11.4

9.1

-1.980247994

1983-01-01

1171.7

2052.9

6804.746

8.8

12.2

4.515962925

1984-01-01

1261.0

2220.3

7293.773

7.6

8.0

7.194823537

1985-01-01

1370.9

2416.4

7595.557

8.7

8.9

4.112023532

1986-01-01

1464.0

2618.2

7858.717

6.8

8.1

3.427217611

1987-01-01

1540.5

2783.0

8110.111

5.2

6.5

3.167105357

1988-01-01

1623.7

2936.9

8443.528

5.4

5.4

4.100067576

1989-01-01

1741.0

3053.9

8745.202

7.2

4.2

3.564993906

1990-01-01

1879.5

3224.9

8909.357

8.0

5.5

1.856092101

1991-01-01

1984.0

3345.1

8888.491

5.6

3.7

-0.261221209

1992-01-01

2149.0

3406.5

9190.053

8.3

1.8

3.4047697

1993-01-01

2229.4

3442.1

9452.214

3.7

1.1

2.872555466

1994-01-01

2304.1

3488.0

9837.242

3.4

1.3

4.114534629

1995-01-01

2412.5

3558.0

10084.64

4.7

2.1

2.548972794

1996-01-01

2505.7

3730.5

10461.79

3.9

4.8

3.786073016

1997-01-01

2581.1

3919.9

10928.06

3.0

5.0

4.505736321

1998-01-01

2649.3

4197.7

11403.99

2.6

7.1

4.490350805

1999-01-01

2761.9

4506.9

11954.51

4.3

7.4

4.869650281

2000-01-01

2906.0

4775.4

12449.19

5.2

6.0

4.17339067

2001-01-01

3093.6

5192.4

12583.6

6.5

8.7

1.093331662

2002-01-01

3274.7

5587.3

12811.8

5.9

7.6

1.82731315

2003-01-01

3458.6

5972.1

13137.34

5.6

6.9

2.502587834

2004-01-01

3653.6

6252.5

13592.96

5.6

4.7

3.585430846

2005-01-01

3916.4

6519.0

14010.39

7.2

4.3

3.059076051

2006-01-01

4147.9

6860.4

14382.77

5.9

5.3

2.674149622

2007-01-01

4430.0

7294.9

14657.91

6.8

6.3

1.941762606

2008-01-01

4737.3

7814.2

14608.52

6.9

7.1

-0.020505966

2009-01-01

4999.7

8431.3

14099.3

5.5

7.9

-3.5

2010-01-01

5261.9

8622.4

14526.5

5.2

2.2

3


Source: Federal Reserve Bank of St, Louis.

The U.S. policymakers always believed that fiscal stimulation is deemed necessary in economic development and stabilization policy. Consequently, long-run budget deficits were observed from 2002 to 2010. The policy has been revised in response to changing economic conditions. From 2002 to 2006, the budget showed a lower deficit. A big budget deficit occurred in 2008, the year of financial crisis, and continued through 2010. The budget deficit reached peak in 2009 at -10.50 point. While the government has recently monitored its budget deficits, the nominal government expenditures have been steadily increasing until the present time. Government expenditures grew at a fast pace of 14.2 percent in 1981, but the rate of increase had gradually declined to 2.6 percent in 1998. Spending increased steadily to 5.2 percent in 2010. A similar pattern can be seen in money supply (M2). From 1981 to 1993, M2 grew at a decreasing rate from 9.0 to 1.1 percent. The economic slowdown prompted the Fed to increase the money supply at an increasing rate from 6.0 percent in 2000 to 8.7 in 2001 and 7.9 percent in 2009. During 1981 and 2010, the average annual growth rates of GDP, government expenditures and money supply were 2.622563, 6.306, and 5.695928 percent respectively. Overall, the economic growth rate presented more dramatic ups and downs while government expenditures and money supply increased steadily every year.

Literature Review

Thomas Stratmann & Gabriel Okolski (2010) used Federal Spending data in the U.S. to analyze the relationship between GDP growth and various macroeconomic variables. They discovered that “the Government spending, even in a time of crisis, is not an automatic boon for an economy’s growth. A body of empirical evidence shows that, in practice, government outlays designed to stimulate the economy may fall short of that goal” (p.4). This finding implies that an increase in the government expenditures do not always raise the economic growth. Barro (1990) also found that there is the negative relationship between economic growth and the size of governments.

Then, Suleiman Abu-Bader& Aamer S. Abu-Qarn (2001?) found no common causal relationship between government expenditures (military spending) and economic growth in Egypt, Israel and Syria. Andros Gregoriou & Sugata Ghosh (2003) investigated the potential cross-country heterogeneity in capital and current expenditure on economic growth, by studying 15 developing countries over a period of 28 years of a panel framework. They found that for nations such as Brazil, current expenditures have a major role to play in determining long-run growth, whereas for countries like Sudan, current expenditures do not have a major role in the growth. Valerie (2012) studied the effects of the government spending on private activity. She points out that the government spending does not appear to stimulate private activity.

On the contrary, in earlier empirical studies, the theory of Keynesian (1936) economics found that if increased government spending keeps all other components of spending constant, the output will increase. The Keynesian model of economic activities also includes a so-called multiplier effect. Also, Alan & Mark (2010) have pointed out that “In fact, the fiscal stimulus was quite successful in helping to end the Great Recession and to accelerate the recovery. While the strength of the recovery has been disappointing, this speaks mainly to the severity of the downturn. Without the fiscal stimulus, the economy would arguably still be in recession unemployment would be well into the double digits and rising, and the nation’s budget deficit would be even larger and still rising” (p.14).

 Otherwise, Carlos & Stefanoa & Christian (2012) pointed out that “We find a positive link between the policies and measures of inflation and real GDP growth expectations. After the implementation of various policy initiatives, forecasters raised their expectations of inflation and GDP growth. Their response indicates that the policies were, to some degree, successful in shaping expectation”(p.9). That is, most GDP growth comes out of the policies since the policies give the people a positive expectation. The purpose of this research is that study the relationship between the government spending and economic growth. The next two sections present methodology and empirical results. The last section provides summary and suggestion.

Methods

As I mentioned above, this research will find the relationship between government spending and GDP growth of the United States for a period of thirty years.

The following independent variable will serve for factor: GDP growth rate. Data is collected from Federal Reserve Data Source. The paper will proceed to conduct the unit root test, Johansen cointegration test and the vector error correction model (VECM) estimation. These models would help me to inspect the relationship between government spending and GDP growth. Firstly, I would draw the graph of time series data to compare the trend of these data intuitively. Secondly, I would like to use the EVIEWS (A Software) take the unit root test. We can find whether the two data is stationary or non-stationary. After that, I will take the Johansen cointegration test to test whether there is a relationship between these two variables. If there is a relationship between them, it would appear on the data. If not, we also can conclude there is no relationship between them. Next, running a vector error correction model (VECM) on EVIEWS using the method should yield the necessary information. Finally, I will run the conclusion of the ARMA model to compare with the conclusion of VECM model and choose the better one. EVIEWS supplies numbers and data, which make it probable to explain the validity of my model. These data are Augmented Dickey-Fuller test statistic, adjusted R-square, T-statistic, P-value, and some coefficients respectively.

Using these EVIEWS tools, helps to interpret the previous research and stand by my theory of the influence of government spending on GDP.

 

 

Discussion

From the previous articles, there is advanced discussion about the relationship between government spending and GDP. All the mentioned articles examine this relationship between the two variables as the main theme. In other articles, the authors found out different results for this relationship. Thomas & Gabriel (2010) described that government spending, even in a time of crisis, for example, in the 2008 economic crisis, is not an automatic boon for an economy’s growth. Barro (1990) concentrated on the size of governments and economic growth, and found a negative relationship between these two variables.

Valerie A. Ramey (2012), studied whether an increase in government spending stimulates private activity. She pointed out that government spending does not appear to stimulate private activity. Furthermore, all the papers evaluated government spending over so many countries. However, those different countries have different conclusions. It is more difficult to compare the countries and results. Since all papers cannot respect all the possible facts, so they have weaknesses in their argumentation. Andros & Sugata (2003) only investigated the relationship between government spending and GDP from Egypt, Israel and Syria, that is, the government spending does not have a major role in the growth. Thus, this paper did not pay attention to the whole world. Through the background of these papers, it should be feasible to confirm whether there is a relationship between government spending and GDP without any transformation caused by different country situation or a lack of data material.

However, because in the US different periods have different situations, since the policy and other significant factors like level of war, economic recession and even national psychology. Therefore, it seems logical to consider the distinction in different periods for the U.S.

Thus, it is desirable to estimate the influence of the different factors on the relationship, and find whether there is a relationship between these two variables, if there is, also find how we can explain the relationship.

Results

In the results of my research, I expect variables like GDP and government spending to have a long-run relationship between them. Moreover, I am going to confute that there is no relationship between these two variables. Furthermore, I am also going to explain that a higher expenditure in government causes a stronger economic growth. Some issues would be the limited number of observations from the EVIEWS, which could cause an unclear interpretation of the results. Thus, there is the feasibility that some parts of the period do not supply the real data.

Considering above mentioned, this research is the best method to conduct investigations on the relationship between the GDP and government spending.

 

References

 

Alan, S. B. & Mark, Z. (2010). How the Great Recession was Brou

ght to an End. Retrieved from: http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf

Andros, G.. & Sugata, G.. (2003). The Impact of Government Expendi

ture on Growth: Empirical Evidence from a Heterogeneous Panel. Retrieved from: http://v-scheiner.brunel.ac.uk/bitstream/2438/3543/1/0701.pdf

Barro, R. J. (1990). Government Spending in a Simple Model of Endogeneo

us Growth. Retrieved from: http://www1.worldbank.org/publicsector/pe/pfma06/BarroEndogGrowthJPE88.pdf

Carlos, C., Stefano, E., Christian, G.,. (2012). Policy Initiatives

in the Global recession: What did Forecasters Expect. Retrieved from: http://www.newyorkfed.org/research/current_issues/ci18-2.html

Keynes, J. M. (1936). The General Theory of Employment, Interest, and Mo

ney. Retrieved from http://etext.library.adelaide.edu.au/k/k44g/k44g.zip

Suleiman, A. & Aamer, S. A. (2001). Government Expenditure

s, Military Spending and Economic Growth: Causality Evidence from Egypt, Israel and Syria. Retrieved from: http://www.econ.bgu.ac.il/papers/163.pdf

Thomas, S. & Gabriel, O. (2010) . Does Government Spending Aff

ect Economic Growth?. Retrieved from: http://mercatus.org/publication/does-government-spending-affect-economic-growth

Valerie A. R. (2012). Government Spending and Private Activity. Retrieved

from: http://www.nber.org/chapters/c12632.pdf



Critique of Not your Father’s Recovery
April 26, 2012, 6:01 am
Filed under: Uncategorized

Critique of Not your father’s Recovery?

            “Not Your Father’s Recovery?”written by Kenneth R. Beauchemin, was published in the Federal Reserve Bank of Cleveland in 2010. The article is outstanding for its certain data processing, good organization and comprehensive usage of illustrative graphs. Though very impressive, the article would have been more persuasive and competent if it had made more proof of the cause of Great Recession and had made more certain dates in the graph.

            As for the article’s organization, it is not hard for the audience to follow the authors’ core train of thought and know the main ideas since there are a lot of key sentences distributed all over the paragraphs indicating the topic sentences. For example, we can find sentences, “If all goes according to the usual business-cycle dating procedures, a committee at the National Bureau of Economic Research (NBER) will soon convene to declare that what has come to be known as the “Great Recession” came to an end in June 2009 (Kenneth R. Beauchemin, page 1). At the beginning of the first paragraph of the introduction, “The Comparison is made using a scaled-down version of the sophisticated and powerful models that real forecasters actually use. Applying it to real Gross Domestic Product (GDP) growth, unemployment, inflation, and the federal funds rate suggests that the recovery looks consistent with past recoveries-at least so far.” (Kenneth R. Beauchemin, page 2) With these sentences, we may already have a general idea about the article’s thesis, not to mention other helpful sentences at the beginning of each paragraph.

            What makes the article more consequential is that the author provided certain data processing. To analyze the Great Recessions impact on economics, the authors set some real dates. Especially in the second part of the article, the authors skillfully used four real data examples to illustrate and emphasize their conclusions. There are realGDP, Core PCE (Personal consumption expenditures price index) inflation, Unemployment rate and Federal Funds rate respectively, that is, using the Vector-Autoregression (VAR) model to forecast the real data can totally help people know what we will do in the future, also know what the trend is we would face.

            Another aspect of the article that impresses me profoundly is that there are many clear and illustrative graphs. In the first part, the article explained the severity of the Recession and the Strength of Recovery, such as, the percentage peak-to-trough decline. Then the author made the real GDP as an example to improve the point. Next the authors told about Implications for realGDP, Core PCE inflation, Unemployment rate and Federal Funds rate. In the last part of the article, the authors made a conclusion the whole article. The author using the illustrative graphs to appeared what happened was for these indexes.  

            However, throughout the article, there is an little detail concerning the data processing in the Forecast Date. The article mainly introduced the meaning of words. It only briefly used notation and formulation, also without specific demonstration in a statistical way. Thus, if the author add these parts into the article, it would be better than now.

            All in all, the article is extraordinary, because there is a certain data processing in it, good organization and comprehensive usage of illustrative graphs. However, it would have been more successful if it has some detailed information of the data processing in the Forecast Date to support the author’ opinions.

 

Reference:

Kenneth, R..B. (2010, Sept). Economic Commentary. Not Your Father’s Recovery? Retrieved from http://www.clevelandfed.org/research/commentary/2010/2010-12.cfm



Research Essay Analysis Assignment
April 26, 2012, 5:57 am
Filed under: Uncategorized

Summary

The paper titled “Not your father’s Recovery” written by Kenneth R. Beauchemin, was published in the Federal Reserve Bank of Cleveland, in September 9, 2010. This paper focuses on the primary problem of the recovery in the wake of the Great Recession. The author introduced the vector-autoregressive (VAR) model and thinks this model to solve the problem of the recovery in the Great Recession. This paper is published from Economists or experts in Economics regarded by the Economics issues.

Organization

The author organized this paper with a short introduction and a long part of graphics and literature review, a long recommend and a shorter conclusion. This paper is structured into distinct sections. The direct thesis is located in the first paragraph of the first sentence “If all goes according to the usual business-cycle dating procedures, a committee at the National Bureau of Economic Research (NBER) will soon convene to declare that what has come to be known as the “Great Recession” came to an end in June 2009” (Kenneth R. Beauchemin, 2010).

Also, the paper is cleanly organized. The paper has the main theme at the beginning with a brief guide to the audience, the basal Economics backgrounds, the results of the research and the approaches.

In the first part of the paper, there is the abstract section. The authors concluded, “The comparison is made using a scaled-down version of the sophisticated and powerful models that real forecasters actually use. Applying it to real GDP growth, unemployment, inflation, and the federal funds rate suggests that the recovery looks consistent with past recoveries- at least so far.” (Kenneth R. Beauchemin, 2010). This part served as the overview and explicit display of the paper.

The second part of the paper is the literature and graphics review, which introduced the Vector Autoregressions (VAR) and the Force of History. In order to benchmark the new way, the authors contrasted the knowledge of the features of economics and what is the VAR model, also, why we would use the VAR model to do the research.

The third part of the paper is the methods, which is focuses on the Economics index forecast uses the VAR model. the first section is Recovering from the Great Recession. The authors put some examples like the model that is fitted to data from the first quarter of 1959 through the second quarter of 2009. The second section is the force of a more modern history. The authors pointed out some tricks when we use the VAR model.

Finally, the paper shows the concluding comments to sum up the whole passage.

Research

For regular research, most of the research in this paper is secondary research. As for this paper, most of the research came from published data and Economics reporting, because the author use direct data to analyze the topic of the paper. Thus, the authors supported their ideas more with secondary research. Furthermore, they displayed one table to show the details of knowledge of economics. For example, the authors provide the conception of Real GDP and Core PEC inflation. The authors also use paraphrases to support the topic. The paraphrases are more than the direct quotes and data. The document style is APA.

Style

Looking at the style, the author tended to use present tenses and active voice when delivering the article. He also chooses 1st person plural for start. It helps the author express ideas logically and the readers understand easily. For example, “The line predicts 9.7 percent growth from the third quarter of 2009 to the second quarter of 2010, but we got only got 3.2 percent instead.” (Kenneth R. Beauchemin, 2010). Next, as for the paper, diverse transitions have been included between paragraphs, between words and between sentences. Conjunctive adverbs, for example ‘however’ and ‘therefore’ play the role in building up sentence relations. ‘As a result’, ‘But’, are used as paragraph-level transitions to signal connections. Many more transitions, such as ‘and’ and ‘so’, show the coherence among statements and words.

The paper’s main point is stated with each paragraph in the first sentence-a one-sentence summary. It was said what to expect as the audience goes on. They come first in the paragraph related to them. Therefore, the authors give the topic sentence was that “Two consequences of such an approach are important for Economics forecasting approaches.” Then the author explains some consequences in the following paragraphs.

Conclusion

All in all, this is a high-quality paper. The details of the context are about the interpretations of VAR model. I read the paper and got some news idea about Economics. This is not just a good writing lesson, but also a helpful one of my field of study. However, I knew how to use research results in a paper. It will help me to write a good paper in economics in the future.

References

Kenneth, R..B. (2010, Sept). Economic Commentary. Not Your Father’s Recovery? Retrieved from http://www.clevelandfed.org/research/commentary/2010/2010-12.cfm



BG’s life.
October 19, 2011, 2:34 am
Filed under: Uncategorized

I have been BG three months ago. Before arrived BG, I thought that I could not adapt the life in BG, since there are so different between the China and US. But now, I think the differences are not so much as I thought. Bowling Green  just a small town where is located in the North of Ohio, there are lots of interested things I can find in Bowling Green.

Firstly, I’ d like to talk about Food. We know that we should eat food very day. But, because I am come from China. Thus, before I came to BG, I thought that  the food flavor in China much better than US.  Actually, I found a situation that US just have a little bit US typical  foods. Such as, hamburger, chips and Coca Cola. Almost all of others are come from other countries. For example, I found there are more than three Chinese restaurants in Bowling Green. And lots of Mexican restaurants, Korean restaurants etc.  Anyway, I like food in BG, since I can eat the food from all over the world.

Secondly, I want to talk about the school life in BG. Before I arrived here, I have some preparation for the hard school life, but now, I do not think there are much trouble for my life. Bowling Green State University is a high level University in Ohio, even in whole US. But,  the teacher and students are very nice.  Because I am an International student for here, also I have probably taken some troubles more than local students. For instance, I would sighed for my hometown and friends. But, local guys can back home when they miss their family. However, education system in BGSU is not same with  my undergraduate education system, that is a big problem for my school life. But, I have lots of nice classmate and teacher help me to adapt the new system for my new life in a short time. It is a good experience I think. Also, it is why I came here. I need more practice for my life.

In short,  I love BG so far, not only it has palatable food and nice teachers, but also has other sides I never been mention. Live in BG is a prefect experience in my life.

 



Plagiarism
September 21, 2011, 9:57 am
Filed under: Uncategorized

Plagiarism is one of the serious errors in academia. In my mind, the Plagiarism seems like behavior of steal in society. But, everyone knows the thief had been existed thousand of year. Thus, we just can keep ourselves far away from this bad behavior.

However, not all of the student think like me. Some of the radical student would be chooses the way of plagiarize to finish their paper or homework.  Suppose they are probably taken part in a paramount party last night. Thus, they could be made a plagiarism from some other students or book.  Also, they have no idea about the paper long time, but they have to hand it in, because that score of paper is very important for them. Anyway, there are lots of reasons to explain why they would choose plagiarize. But, I think all of reasons cannot let them do that.

Also, in my home country, plagiarism is very common thing occur in the campus. Sometimes occur on students, sometimes occur teacher. China is a county filled of energy. And China is the biggest developing country in the world. So, blundering mood filled in whole of county also, Less students could calm their mind down to finish their paper. But, I think this situation is a process of primitive accumulation period.

All in all, no matter what reason we are have. Plagiarism is a forbidden behavior. We should calm down to do some perfect paper in our field of major.

 



First day of my blog.
September 1, 2011, 5:20 pm
Filed under: Uncategorized

Obviously, reading book is a significant thing for graduate students. Actually, I also like reading book. But, I think that I am a sane book reader so that I do not have any specific favorite book or author. In addition, I believe that we need absorb knowledge from all kinds of book, since comprehensive abilities are depend on amount of books reading and thinking after read. For example, my major is economics, but when we run into some problems in the region of economics, we cannot only use the analytical way of economics, but also we should according to the theory of other subject.  Such as, we could link the region of law. Even we could connect the region of psychology to help us to analyze the data or phenomenon of custom behavior.  Thus, I cannot provide a specific name of book or author as my favorite, but I just let you know, comprehensive reading is not bad for us. Sometimes it can create some of extra opportunites to us in unexpected time.

Moreover, As the English reading, I learn that vocabulary is very important point for us reading, since if could not understand almost words in that book, I guess we might not be understand what the book’s mean forever.  Consequently, the foundation of reading is words. We have to define the exact mean in the book, which is you are interested. Likewise, Grammar is the second significant factor for our reading I think. For instance, we can work out all of words in this book, but we usually confusing about what it happened and when it happened. As a result, Grammar could helps us to figure the tense problem out.



Hello world!
August 26, 2011, 3:41 pm
Filed under: Uncategorized

Welcome to blogs.bgsu.edu by COBL. This is your first post. Edit or delete it, then start blogging!



This is Tao Tang(Tony)
August 26, 2011, 12:16 pm
Filed under: Uncategorized

This is Tao Tang.

I am come from Hunan, China.

I am a gradutate student in BGSU. My major is Economics.

I like music, movies and sports.   I willing make lots friends in here.

Thanks for you visit.




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