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ECON 0280 Assignment 1

ECON 0280 Assignment 1 - will affect the interest rates on...

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ECON 0280 Assignment 1 Due: beginning of lecture on Tuesday 26 th May. Length: approx. 1-2 pages Ireland is currently experiencing a severe contraction. In some ways its problems are similar to those in the US: a housing boom turned bust, rising unemployment, and a heavily indebted society. 1. What has happened to tax revenues and the government deficit in Ireland in the past couple of years? How has this affected the level of borrowing by the Irish government? Using the classical loanable funds theory (and diagram), explain how this will impact interest rates in Ireland, other things equal. 2. There is considerable concern about the ability of Ireland to repay its government debt. According to the theories discussed in lecture, explain how this problem
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Unformatted text preview: will affect the interest rates on Irish government bonds relative to a country with low default risk (such as Germany), other things equal. Is there evidence of a recent change in the spread between German and Irish government bond interest rates? There are many sources of this information. Useful sources include financial newspapers such as the FT or Bloomberg, as well as general Irish newspapers such as the Irish Times ( www.irishtimes.com ) or the Irish Independent ( www.independent.ie ), as well as numerous other sources you can find on the internet. You must include a reference list of your sources!...
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