China in the Global Economy (Fall 2024) Problem Set 2Matlab

Java Python CCCH9007

China in the Global Economy (Fall 2024)

Problem Set 2

(100 points total)

Due October 28th, 2024 before 11 pm on Moodle

NOTE: the total pages for this homework should NOT be more than five pages, not including figures and tables (if any), or references.

Select a time period of 10 years since China started economic reform in 1978, download China’s GDP data from the source suggested, and answer the following questions:

a.   (10 pts) Data collection and analysis (Data source: https://data.worldbank.org/):

i.   Calculate the GDP growth rate (year-to-year growth rate) for the ten years you selected; (3 pts)

ii.   Plot the GDP value and growth rate you calculated for each year (3 pts);

iii.   Describe the  basic trend and  relationships of these two measures during the time period you selected (4 pts)

b.   (20 pts) GDP has been criticized as a “deeply foolish” indicator of how an economy is doing because it excludes activities that would be classified as having economic values.

i.   Please introduce two examples of such activities based on your  personal experience. Then, explain why they are not included in the official measure of GDP by following our discussions of GDP in the lecture. (10 pts)

ii.   Discuss: from  Chen,  etc.  (2019)  pape China in the Global Economy (Fall 2024) Problem Set 2Matlab r we understand that local officials may over report its regional GDP for the reward of meeting the growth target. From the data period you selected, do you think the GDP growth is inflated? If yes, do you have any suggestions to solve this issue? (If no, please give your explanations) (10 pts)

c.    (15 pts) Following question a, please list three factors that you think should be the most important reasons to explain the trend/changes you observe and explain why.

Note: just a suggestion for you to kick off your analysis, you may try to think in the aspects  of  macroeconomic  policy,  trade  and  foreign  investment,  technology, human capital, or enterprises and consumers’ behaviors.

d.   (25 pts) International comparison:

i.   Download the GDP data for another country over the same time period as question  a  (e.g.  United  States,  Japan,  or  India)  and  calculate  the  GDP growth rate for the selected country (10 pts)

ii.   Why China’s average GDP growth  rate  is higher/lower than the selected country over the same time period? (15 pts)

e.   (15   pts)   Solow  growth   model   predicts  that  countries  with   higher  rates  of investment will be wealthier (higher GDP at steady state). However, due to the law of diminishing returns, the economy eventually slows down and stops growing in the  new steady state. As a  result, do you think  increasing investment is still a productive strategy to promote economic growth?  Please explain

f.    (15 pts) Investment was believed to be one of the major driving forces to China’s economic growth. Using the World Bank data source mentioned above, collect the data about “Gross capital formation” of China during the past ten years. What happened to China’s investment? And please give three reasons to explain the change.

Note: to better investigate and study the data trend, you may check its value, year- to-year percentage change, or the share of GDP