ECON1082 : You are a graduate employee at an international economics think tank called the Global Research and Analytics: International Monetary Economics Report, RMIT, Singapore

Task:

You are a graduate employee at an international economics think tank called the “Global Research and Analytics” and you have been asked to provide research on the COVID 19 recession and policy response in two countries that have strong trade relationships.

You need to select two countries- a large developed economy and a smaller developing economy Specifically, you have been asked to

1. Provide the overview and the assessment of the impact of pandemics on the economy in the two countries. Show the strong trade link between the two countries and the effect of Covid on the trade and capital flows.

2. Evaluate the effectiveness of Covid Policies on the Macroeconomy on both a large economy and a smaller developing economy that have strong trade relationships. You might want to check the Policy response tracker by IMF.

3. You are also asked to examine the macroeconomic interdependencies between the large, developed economy and their smaller trading partner. From your findings what can you deduce about the economic recovery, as we move into 2022?

4. Discuss the role of trade and capital flows for the effectiveness of the policy in two countries. Keeping the HBR article in mind assess what reduced globalization of trade due to pandemic will mean for the policy effectiveness and economic recovery.

Is there a role for cryptocurrency and the digital economy in the pandemic recovery?

Please see some topics that may be relevant to your report below

these are suggestions and not all may be relevant to the countries you choose to examine the current economic context of both countries:

What has been GDP growth/unemployment/inflation in recent quarters?

What are the major policy concerns for both economies?

Balance of payments What does the balance of payments indicate about the economies’ net wealth

what have been recent changes or trends in the balance of payments in the respective economies and what are the key drivers of that change?

What does this imply about the country’s approach to trading consumption across time – historically have they been net lenders / net borrowers?

Has COVID resulted in any major changes in Balance of Trade / the CA / the financial account – (magnitude of change in both economies) What can you deduce about both economies from the balance of payments data.]

Topic 3 – Exchange Rate determination

identify and contextualize what drives the value of the country’s currency Have there been recent changes in the value of the domestic currency and what might be driving this link to the theories of exchange rate determination eg inflation, interest rates, etc …Big Mac index PPP Identify any major shifts in fiscal or monetary policy

how might this impact on the value of the currency What is the role of the respective central banks? Is the exchange rate managed?

Are there discussions around a Central Bank Digital currency? How might this impact the exchange rate Are there concerns around capital flows?

If the exchange rate is flexible how volatile have fluctuations been How sensitive is the economy to changes in the exchange rate?

Topics 4 and 5 – How might a change in the exchange rate impact the trade balance?

How might a chance in the RER come about (change in e or relative prices) Estimate which quadrant of the SWAN diagram your country of choice may be operating in?

What might that predict about the role for policymakers – what should be the policy focus – internal and external balance?

Topics 6, 7,8 – IS-LM BP model applications Impact of Expansionary fiscal or monetary policy Changes in relative interest rates The effect of Covid – (external shock and the adjustment mechanisms) Map the Macroeconomic interdependencies and spillover effects of policy changes in the large economy How exposed are the economies to external shocks How exposed are the economies to internal shocks Is there fear of currency crisis – credibility concerns relating to the domestic currency.