ECON1192-ASM3.docx - Fiscal Policy of Germany Report ECON1192 Macroeconomics 1 Assignment Macroeconomic Policy Report Name Mai Huynh Bao Han ID number

ECON1192-ASM3.docx - Fiscal Policy of Germany Report...

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ECON1192 - Macroeconomics 1 Assignment: Macroeconomic Policy Report Name: Mai Huynh Bao Han ID number: s3818233 Lecturer: Pham Thi Thu Tra Word Count: 1649 words Fiscal Policy of Germany Report
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Table of Contents Macroeconomic Snapshot .................................................................................. 2 Pre-COVID-19 period .................................................................................... 2 Post-COVID-19 period ................................................................................... 4 Fiscal Policy Analysis .......................................................................................... 5 Impact of Fiscal Policy ....................................................................................... 5 Conclusion ........................................................................................................... 7 Comparison and contrast between Vietnam and Germany ............................ 7 PPP test ................................................................................................................ 7 Challenges of a possible arbitrage ..................................................................... 8 Reflection ............................................................................................................. 8 Appendices ........................................................................................................... 9 References .......................................................................................................... 11
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Macroeconomic Snapshot Germany is situated in central Europe and claimed to be the second most populous nation. The country has a great contribution to the economy since it is a foremost exporter, hence it becomes Europe's largest and also the fifth-largest economy in the world (CIA n.d). Pre-COVID-19 period Growth rate Figure 1. Growth rates (%) of Germany from 2009 to 2019 – Reproduced from World Bank 2020 (a) . 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -5.7 4.18 3.92 0.42 0.43 2.23 1.74 2.23 2.47 1.53 0.56 Table 1. Germany’s data of growth rates (%) from 2009 to 2019 – Reproduced from World Bank 2020 (a) . Before having a stable growth in later years, the economic development of Germany had undergone a significant fluctuation. Specifically, the growth rate touched the bottom in 2009 with -5.7% due to the collapse of world trade flows caused by the global financial recession and Euro-crisis (Harari 2014). The rate dropped severely since Germany’s growth depended mainly on export (Dauderstädt 2013). Subsequently, the country managed to recover the growth strongly and sustainably. Especially, the recovery in 2010 and 2011 was significant as ingenious corporatist working time management was applied.
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Inflation rate Figure 2. Inflation rates (%) of Germany from 2009 to 2019 – Reproduced from World Bank 2020 (b) . 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 0.31 1.1 2.08 2.01 1.5 0.91 0.51 0.49 1.51 1.73 1.45 Table 2. Germany’s data of inflation rates (%) from 2009 to 2019 – Reproduced from World Bank 2020 (b) . Inflation rates witnessed dramatic shifts in 2011 and 2017 as well as the five-year continuously declining rate. In detail, supply-driven oil prices affect production costs and aggregate demand, resulting in influencing inflation (Živkov et al 2018). Therefore, the nation experienced the lowest percentage in 2009 and had a five-year low rate due to stagnation in prices caused by the global recession. Particularly, falling energy costs such as oil prices contributed significantly to keep the price down (DW 2009). Contrarily, the inflation rate increased dramatically in 2011 and 2017 because of the notable increase in energy prices (FRANKFURT 2012; RTTNews 2018).
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Unemployment rate Figure 3. Unemployment rates (%) of Germany from 2009 to 2019 – Reproduced from World Bank 2020 (c) . 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 7.74 6.97 5.82 5.38 5.23 4.98 4.62 4.12 3.75 3.38 3.14 Table 3. Germany’s data of unemployment rates (%) from 2009 to 2019 – Reproduced from World Bank 2020 (c) . The unemployment rate saw a decreasing trend in a 10-year period after peaked at 7.74% in 2009. As a result of the global crisis, Germany experienced a banking crisis and a steep fall in demand for export sectors, suggesting many workers were terminated to work in recession year (Aricò & Stein 2011, p.6-7). Subsequently, the rate had been down steadily and reached 3.14% in 2019. This success is the result of stricter monitoring activities, effective placement,
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