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roubini2 - Global Macro Assignment 1- q 3 4 5 8 Names...

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Global Macro Assignment 1-- q 3 4 5 8 Names Nouriel Roubini 10-04-09 Provide forecasts for each of the following variables with a detailed explanation following each number that explains how and why you chose the number. 1. Real GDP growth for 2009 Quarters III and IV - SAAR (Seasonally Adjusted Annual Rate). The US economy contraction that began in December 2007 has been the worst financial crisis since the Great Depression. In the second half of 2008, failure of Lehmann Brothers was a further confirmation of the massive financial instability this country was going through. The financial crisis led to an upsurge in unemployment rate, which peaked at 9.8% 1 in September of this year. 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 deep recession, things seem more favorable as the supply side conditions improve a bit with a slowing run off inventory, export growth, less negative industrial production, and strengthening federal government purchases due to the fiscal stimulus package. Federal reserve chairman Ben S. Bernanke at the Brookings Institution in Washington 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 decline 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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contracting to 1.0% in the second quarter of 2009 we project that: I Q II Q IIIQ IV Q Real GDP -6.4% -0.7% 0.7% 1.9% Looking forward towards the next two quarters we follow the BEA projections of 2009 that the GDP will rise by 0.7% in the third quarter and will further go up to 1.9% in the fourth quarter. This can be reflected in the fact that the businesses are moving towards rebuilding inventories, adding to 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 09 to -0.3% in August 09. Real GDP growth is back in positive territory posting an increase of 1.3% in September. We are following the BEA projections because they are somewhere in the median of all other projections we found. We can see a positive growth in real GDP this is mainly because of: 1. Upturn in government spending. The Fed stimulus of more than 5per cent of its GDP, ie
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roubini2 - Global Macro Assignment 1- q 3 4 5 8 Names...

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