Satisfaction Guarantee

First time here?

usewelcome15 to get 15% off

Discuss what happens during different time periods and tie them to actual events inrecent economic history of your selected country.

In particular, grammar and spelling errors willbe penalized. Make sure your graphs are legible and clearly labeled.Problem 1Choose your favorite country among the European PIIGS (Portugal, Ireland, Italy, Greece,Spain). Find annual time series data starting around 1970s on real output, real investment,employment, working-age population and hours worked. Assume that production technologyis described by the functionYt=AtKtL1t, and that the resource constraint isCt+It=Yt.i. Discuss whether the country of your choice has experienced a Great Depression in thelast 20 years, as defined by Kehoe and Prescott (2007). If not, which criteria of thedefinition are not satisfied and by how much?ii. Use real investment data to construct a series for the capital stock following the ruleKt+1= (1)Kt+ItKT0= KT0whereT0is the first year for which you have data on output and investment. Calibratethe parameters for annual depreciation rateand capital share. Choose KT0so thatKT0+1/KT0= (KT0+10/KT0)1/10iii. Repeat part ii., but now choose KT0so thatKT0/YT0=(T0+9t=T0Kt/Yt)/10iv. Compare the two series constructed in parts ii. and iii. Plot them on a graph.v. Conduct a growth accounting exercise for your economy. Decompose growth fluctua-tions in real GDP per working-age person into three factors according to:YtNt=A11t(KtYt)1(LtNt)1
Discuss what happens during different time periods and tie them to actual events inrecent economic history of your selected country.Problem 2Now consider a growth model with infinitely-lived, representative consumer. Given deter-ministic sequences of total factor productivity and population{At,Nt}t=t0the representativehousehold solves the problemmax{Ct,Lt,Kt+1}t=0t=t0tt0[log Ct+ (1)log(Nt hLt)]subject to (for allt= 0,1,…):Ct+Kt+1Kt=wtLt+ (rt)KtKt0= Kt0A representative firm solves the static profit-maximization problem in each periodt:max{Kf,t,Lf,t}AtKf,tL1f,twtLf,trtKf,tsubject to:Kf,t0;Lf,t0All markets must clear in the general equilibrium.i. Use the data from Problem 1 (and any additional data that you may need) to calibratethe parameter values forand.ii. Summarize your calibration with a table and make sure to includeallparametersin your model. Discuss your assumptions behind the most important/controversialparameter values.iii. Download the MATLAB codes to solve this model from Blackboard. Prepare the timeseries for TFP and working-age population. Prepare the input filesdataBase.txtandparamBase.txtcontaining your input data and calibrated parameter values. Solve themodel in MATLAB.1iv. Plot the model-induced time series forYt/Nt,Lt/NtandKt/Ytagainst those from thedata. Discuss what happens to your economy before and during the financial crisis.v. (EXTRA CREDIT) Survey the recent literature in academic economics that seeks tounderstand the sources of economic collapse in your country. Do their answers alignwith your findings? If not, or it is not clear, then where might the difference be comingfrom? What important elements is our model potentially missing