HE2006: Region Econ is an economics consultancy firm with 50 Economists : International Monetary Economics Coursework, NTU, Singapore

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University Nanyang Technological University (NTU)
Subject HE2006: International Monetary Economics

Executive Summary Report

“RegionEcon is an economics consultancy firm with 50 Economists working in various locations around the world. Their clients are both private sector and Government based with interest in the current status and future directions of important global macroeconomic variables and resulting country forecasts for the medium-term.

The analysis provided by RegionEcon provides clients in the Singaporean market valuable information on their interaction and exposure to international markets including not only the Asian pacific region but also the United States, the Eurozone, and key emerging market players.

Assessment of expectations regarding growth trends based on relative interest rates, the value of the domestic currency, commodity markets, and expected policy directions are provided. As a Consulting agency we develop bespoke scenarios to fit the needs of your organization to test the robustness of your business plans or investment strategies, assess the impact of policy, evaluate the risks involved in entering a new market”

Task: You are a graduate employee at “RegionEcon” research and you have been allocated to a team asked to provide some current research on a client market of your team’s choice. (This can be any major economy in the world for which you can access information for key economy variables). The audience for the research and the executive summary is the manager of the regional “country” division you have chosen to study and will be passed on to the client (the large company operating in your country of choice) once reviewed by your manager. The task is to produce an assessment of likely changes in key economic variables for that market and the implications of those changes on broader macroeconomic conditions.

Your group’s contribution is to present an application of the course theory for a chosen economy. Your assessment of the International Macroeconomic conditions of your market will support the client by;- Helping clients to Be better equipped to make the right strategic business decisions Plan more effectively when entering new markets Understand the bigger picture when making investment appraisals Be better prepared for the policy or regulatory change Influence policy-makers, officials, regulators, customers or the public with greater authority You are required to develop a research strategy supported by the set of tasks listed below.

Drawing on that research you are then required to draft an Executive summary report (1200-1400 word) highlighting the key points of your findings and providing an assessment of expectations regarding relative interest rates, the value of the domestic currency, commodity markets, and expected policy directions. For example,

What likely market and policy changes might drive movements in exchange rates and why?

what can theory tell us about the implications of monetary and fiscal policy on international monetary flows?

How might trade in both goods and services and assets impact the balance of payments?

What does this mean applying an economic perspective How might trade and policy changes – both current and expected impact on internal and external balance, domestic saving and consumption practices, and likely economic growth trends The following tasks provide some guidelines to support your research.

Each group member should be involved in contributing in some way to EACH weekly task – ensure that there is an ongoing collaboration. suggested tasks are:-

Task 1 form groups in class and update details on Canvas assign group roles based on skills/strengths in the group – data analyst/editor/ conceptual framework set up a shared document within the group space on canvas – this is necessary to show group participation

– refer to dates above Choose the country/region you would like to research Provide a brief country-specific market history. Have there being any significant social, cultural, or political events in the last year that might influence international transactions/engagement with trading partners or buying or selling of assets across borders.

Task 2 Identify and examine trends in economic indicators from your chosen countries National statistics office

Task 3 Link the theory in topics 1, 2 to your chosen region To help you some possible questions may include applying and contextualizing the data collated in the previous week to assess:-

What does the balance of payments indicate about the economies net wealth What does this imply about the countries approach to trading consumption across time Can you deduce anything about preferences for current/future consumption What can you determine from (real) interest rates on the return on a domestic investment relative to foreign investment By examining the balance of payments data can you identify any significant changes in trading patterns recently – what has this been driven by – is it likely to be short-run changes or representative of a long-run structural change

Task 4 Focus – Topic 3 – exchange rate determination – identify and contextualize what drives the value of the countries currency What is the structure of the exchange rate mechanism in the country of interest – Fixed, Managed, Flexible?

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 What does the Big Mac index indicates about PPP Is supply or demand for the currency driven by trade in assets?

(Does your chosen economy have a large capital / FX market) or Trade in goods and services (is the economy highly dependent on international trade in goods and services)?

Identify any major shifts in fiscal or monetary policy – how might this impact the value of the currency What is the role of the central bank? Is the exchange rate managed?

Are there discussions around a Central Bank Digital currency?

How might this impact the exchange rate (self-directed research required here) Are there controls on capital flows If the exchange rate is flexible how volatile have fluctuations being – could volatility be explained by any of the theories of exchange rate determination- Dornbusch model?  How sensitive is the economy to changes in the exchange rate

Task 5 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) Is the trade balance sensitive to changes in foreign prices for imports and exports Estimate which quadrant of the SWAN diagram your country of choice may be operating in? (Note you are not expected to identify the relative elasticities of IB and EB schedules) What might that predict about the role for policymakers – what should be the policy focus – internal and external balance what drives the RER – is it changes in the price of Nontradeables or the nominal exchange rate

Task 6 Topics 6 – IS-LM BP model applications Assess possible events that might affect these markets. Use the IS-LM BP model to frame your analysis:-What if: There was either expansionary fiscal or monetary policy What if relative interest rate rise (fall) What if social and political concerns impact trade

Task 7 Topics 7 – scenario applications How open is the economy How exposed is the market to external shocks How exposed is the economy to internal shocks Specify the exchange rate regime and analyze the risks inherent in that exchange rate regime what type of policy interventions are likely given the country context – Monetary? / Fiscal?

Task 8 Draft and submit the executive summary drawing on the group’s research – keep in mind writing style (Links to an external site.) Some tips on report writing (Links to an external site.) As the assessment is the executive summary (Links to an external site.)keep it succinct but informative. The group will need to collaborate on the key messages from their research in the “appendix” that would add value to the manager of your section. For example The purpose of the report – define the report objective (e.g identify recent changes in key variables and apply theory to understand expected future changes ) The results of the research – key findings – refer to the appendix to provide supporting information/analysis The conclusions drawn from the research – identification of key risks, etc. Recommendations for clients operating in that markets – likely macroeconomic trends, etc.

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