Tuesday, January 31, 2012

Assignment 2...

Depending on how much you enjoyed the alternative arrangements now in place for classes on econ101b, you'll either be delighted or daunted by the fact that Assignment 2 is now on WebCT...

The first question asks you to look at a plot of unemployment rates for the UK and a few other countries. In there is both the claimant count unemployment rate, and the standardised rate - two ways of measuring unemployment. As you'll see, the two do differ; the plot of unemployment on the assignment is:

The red lines are UK data, as the legend (top left) shows. The solid red line is the standardised rate, the dotted line the claimant count, and as was discussed in class, often (but not always), the claimant count is below the standardised rate - often considerably so - in 2005 the standardised rate was nearly 5% while the claimant count was just over 2.5%. What drives these kinds of differences?

Moreover, what has unemployment done in the UK over the years?  There's a fascinating discussion of unemployment in the UK on the blog Not the Treasury View, which looks at structural unemployment and something they call the unemployment gap. The blog talks about factors that have influenced unemployment in recent years, and may help you think about this. When was unemployment high, and why might it have been high? When was it low, and what helped it to become so low?

Moving on to inflation, the plot for the second question on the assignment is:
We have data here for CPI inflation for all goods. We could restrict it to core inflation, which excluded energy and food prices - if you're keen, you could search for that data on the OECD Statistics website and compare it to these inflation rates. What you may well find is that core inflation rates between countries differ a little more - the inflation rates we've plotted here include energy and food prices, which are globally traded items and hence a high price of energy in one country is a high price elsewhere too.

Why has the UK had a particular inflation history? What factors have influenced the UK? What about the recent inflationary history, since around 2006 or so?

I'm looking forward to reading your blogs - do let me know links when you've set your blogs up and don't be shy - making your blog more publicly available is a real asset and something that'll look great on your CV in years to come, and will help create even better discussions amongst your class mates.

Enjoy assignment 2 and your classes in weeks 5 and 6!

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