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roubini new 3 - GLOBAL MACROECONOMICS PROFESSOR ROUBINI MW...

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G LOBAL M ACROECONOMICS P ROFESSOR ROUBINI MW 11:00 – 12:15 PM A SSIGNMENT 1 S HANTANU DUTTA JOSH MARCUS AALAP PARIKH PRATYUSH PATWARI PRERNA SARDA
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Global Macroeconomics            Page 2 Assignment 1 P ROVIDE FORECASTS FOR EACH OF THE FOLLOWING VARIABLES WITH A DETAILED EXPLANATION FOLLOWING EACH NUMBER THAT EXPLAINS HOW AND WHY YOU CHOSE THE NUMBER . 1. R EAL GDP GROWTH FOR 2009 Q UARTERS III AND IV - SAAR (S EASONALLY A DJUSTED A NNUAL R ATE ). The recent economic slowdown has resulted in an upsurge in unemployment rate, which peaked at 9.8% in September of this year 1 . The economy shrank as the GDP declined by 5.50% in the 4 th quarter of 2008 and 6.40% in the first quarter of 2009 2 . Furthermore, the world economy saw severe tightening of exports and international trade collapsed. Moving into the 20 th month of recession, economic conditions seem more favorable as the supply side factors improve with a slowing rundown of inventories, export growth, less negative industrial production, and strengthening government stimuli spending. Federal reserve chairman Ben S. Bernanke said that, “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time.” 3 This reflects that even though economic activity remains weak and financial conditions remain stressed, there are signs of improvement. Based on these reports and the Real GDP contraction declining to 1.0% in Q2 2009, we project that: Q1 2009 Q2 2009 Q3 2009 Q4 2009 R EAL GDP C HANGE ( SAAR Q - O - Q ) -6.4% -0.7% 0.7% 1.9% Going into the next two quarters, we agree with the BEA’s 2009 projections of 0.7% GDP 1 Bureau of Economic Analysis . Web. 2 Oct. 2009. <www.BEA.gov> 2 Bureau of Economic Analysis . Web. 2 Oct. 2009. <www.BEA.gov> 3 "Bernanke Says U.S. Recession ‘Very Likely’ Has Ended." Bloomberg . Scott Lanman. Web. 2 Oct. 2009. <http://www.bloomberg.com/apps/news?pid=20601087&sid=aflWYD0hCPqA>.
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Global Macroeconomics            Page 3 Assignment 1 growth in Q3 2009 and 1.9% in Q4 2009. This is reflective of a trend wherein businesses are rebuilding inventories, adding to the already positive effects of a shrinking trade gap and increasing government spending. The decline in real GDP growth, at a six-month annualized growth rate, slowed from -5.9% in March 2009 to -0.3% in August 2009 4 . Real GDP growth is back in positive territory posting an increase of 1.3% in September. Although our research found projections across the entire spectrum of positive to negative outlooks, we base our projections on the following factors: Resilient government spending: The $782 billion Fed stimulus (more than 5% of GDP) provided resilience to financial institutions and bolstered confidence in the markets, creating a large number of jobs and boosting GDP. Smaller decline in private investment:
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This document was uploaded on 10/27/2009.

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roubini new 3 - GLOBAL MACROECONOMICS PROFESSOR ROUBINI MW...

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