Imagine you are graduate employee at "RCIE" research and you have been allocated to a team asked to provide some current research on a client market of your choice. (This can be any major economy in the world for which you can access information for key economy variables) .The audience for the research and the executive summary is the manager of the regional "country" division you have chosen to study, and will be passed on to the client (large company operating in your country of choice) once reviewed by your manager.
The task is to apply the economic models covered in class to help the client understand the current economy in the country of choice and the likely implications of changing trade patterns, policy developments and political sentiment towards globalisation. Your team are expected to conceptually model likely changes in key economic variables with a specific focus on international flows in trade and capital and the mechanisms that drive these flows. As a group you will be expected to apply the tools developed in the course content to delelopeas an assessment the current situation and likely development of your economies macroeconomy. Your assessment of the international macroeconomic conditions of your market will support the client by ;-
Helping clients to:
Be better equipped to make the right strategic business decisions
Plan more effectively when entering new markets
Understand the bigger picture when making investment appraisals
Be better prepared for policy or regulatory change
Influence policy-makers, officials, regulators, customers or the public with greater authority
You are required to develop a research strategy supported by the set of tasks listed below.
Drawing on that research you are then required to draft an Executive summary report (1400-1500 words) highlighting the key points of your findings and providing an assessment of expectations regarding relative interest rates, the value of the domestic currency, commodity markets and expected policy directions.
For example, Why can theory tell us about recent changes in exchange rates ?, what is the role of monetary and fiscal policy ?and implications for internal and external balance, domestic saving and consumption practices and what this means for the balance of payments? etc...
The following tasks provide some guidelines to support your research .
suggested tasks are:-
a.Form groups (max 5 - minimum 2) in your tutorial class and update details on Canvas.
b.Identify groups interests and capabilities
c.Set up a shared group within microsoft teams
d.Choose the country / region you would like to research
e.Consider recent events and do an initial desktop review work (Literature search) on the specific region and country
a.Begin to identify data sources (most recent available - refer to national statistics websites) and collate information on trends in the following variables referred to in the course materials some examples may be :-
c.CoVid 19 data
f.Interest rates of trading partners
g.Real GDP growth
h.Balance of payments (current account balance)
i.Net Debt - as per International investment position
j.Summarise key points of interest in the context of your chosen region
Applying and contextualising the data collated in the previous week assess:-
a.Provide an assessment of the countries current account balance?
b.What does this imply about trading consumption across time
c.Can you deduce anything about preferences for current / future consumption
d.What can you determine from (real) interest rates on the return on domestic investment relative to foreign investment
e.Have there been any changes in trading patterns recently
f.Summarise key points of interest in the context of your chosen region
a.Consider the exchange rate and what is driving recent trends - is it a flexible or managed exchange rate mechanism?
b.The big mac index – is the markets currency considered under or over-valued according to PPP
c.Is supply or demand for the currency driven by trade in assets? (Does it have a large capital / FX market)
d.or Trade in goods and services (is the economy highly dependent on international trade in goods and services)?
e.What is the role of the central bank? Is the exchange rate managed
f.Are there controls on capital flows
g.If the exchange rate is flexible how volatile have fluctuations being - could volatility be explained by any of the theories of exchange rate determination
h.Is there any data relating to level of pass though for the country
i.Summarise key points of interest in the context of your chosen region
a.Is the trade balance sensitive to changes in foreign prices for imports and exports
b.Estimate which quadrant of the SWAN diagram your country of choice may be operating in?
c.What might that predict about the role for policymakers
d.what drives the RER - is it changes in the price of Non tradeables or the nominal exchange rate
e.Summarise key points of interest in the context of your chosen region
Assess possible events that might affect these markets. Use the IS LM BP model to frame your analysis:-What if:
a.There was either expansionary fiscal or monetary policy
b.What if relative interest rate rise (fall)
c.What if social and political concerns impact trade