Assignment 4 macroeconomic analysis

University of International Business and Economics
School of International Trade and Economics
The Graduate Program in Applied Economics

Macroeconomic Analysis

October 23, 2012

Assignment #4

Instructor: Lin Guijun
Email: [e-mail] Time due: Dec 3, 2013 1. The table below show your consumption basket when living in Beijing. Suppose the quantitiy of your consumption for each of the goods and services remain unchanged.

Rental and utility
Entertaiment, sports food Transport and commnication healthcare clothes others 2010
20,000
2,000
10,000
3,000
1,000
1,500
1,000
2011
23,000
2,000
12,000
3,000
1,000
1,400
1,000
2012
22,00
1,900
13,000
3,100
1,000
1,300
1,000

(1) calculate the cost of living in each of the 3 years.
(2) Calculate your consumer price index (CPI) for each of the 3 years.
(3) Calculate the inflation rate for 2011 and 2012.

2. Using the follwing specification to estimate China’s money demand function or the LM function:

Note:
The above modell is based on the Cagan type of money demand. Everything in the model except interest rate Rt (bond rate) is in logrithms.

2. Using data in the following tables *Table 1 to Table 4) to estimate China’s money demand function. Based on the IMF Financial Programming model, discuss China’s monetary policy.

Table 1 Foreign Reserves
Date
NFA(USD) exchange rate
NFA(RMB)
ln(NFA) ln(NFA) Mar-94
286.18
8.71
2492.63
7.8211 Jun-94
318.63
8.65
2756.15
7.9216 Sep-94
398.36
8.53
3398.01
8.1309 Dec-94
516.20
8.45
4361.89
8.3807 Mar-95
579.63
8.43
4886.28
8.4942
0.6731
Jun-95
626.59
8.30
5200.70
8.5565
0.6350
Sep-95
698.00
8.32
5807.36
8.6669
0.5359
Dec-95
735.97