ECON1020 Introductory Macroeconomics Online Tutoring

Executive Summary:

An analysis of an economy through macroeconomic indicators is appropriate and relevant because macroeconomic indicator analyze the economy as a whole rather than analyzing sector wise. This essay discusses why should a client invest in the chosen country. Germany was chosen and its economy was analyzed through macroeconomic indicators, the indicators taken are GDP, GDP per capita, Inflation, Unemployment, Employment, CPI, Household Prices, Stocks and Current account. The time period is taken from 2008 to 2018, the first part thoroughly discusses a chart in which all the values are given over the period of time. Their relationships and the impact of other factors like economic policies on the indicators is also discussed. Moreover, a group of European countries are taken as a benchmark for Germany because all these countries are euro countries with the same lifestyle and culture. The impact of carbon emission is discussed on the development of the country that tells the readers that Germany is one step ahead of every country to reduce its carbon emission. In the last recommendations with limitations are given.

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Macroeconomic Performance:

a.

The country chosen for the assignment is Germany, the macroeconomic indicators chosen for the country are GDP, GDP per capita growth, employers, stocks, inflation, CPI, Household Prices, Unemployment rate and current account balance. The time duration taken for the assignment is from 2008 to 2018 that is 10 years of data. The data is taken from World Development Indicators where data of all the countries is given.

Fig 1: Macroeconomic Indicators

The above table shows the nine indicators with their respective values over the span of ten years, there has been quite ups and downs in the values of the indicators. For instance, the GDP of the country has been fluctuating since 2008 where it was 0.96 during the FY08 and negative in the next. However, it quickly reached to 4.17% in only one year which shows frequent fluctuations about the GDP of Germany. Similarly, after observing the unemployment indicator the Germans have started getting jobs and there is a high decrease in the unemployment rate. It was 7.52% in 2008 but it was 3.3% in 2018 that is a significant reduction in the unemployment rate.

There can been seen important relationship between different macroeconomic indicator like the relationship between employment and unemployment, relationship between GDP and GDP per capita and relationship between Household prices, Consumer price Index (CPI) and Inflation. When observing the first relationship that is between employment rate and unemployment rate, we can see that there is a 4% decrease in the unemployment rate whereas there is not much decrease in the employment rate. The employment rate in 2008 was 4.7% where as it was 4.2% that is not a huge reduction in the employment among the Germans. This means as the country got hold of the financial crises more and more people were employed. The values belonging to the indicators in the second relationship has been frequently fluctuating, the values aren’t fixed even for two years. The values of GDP and GDP per capita have been changing side by side and are really close. However, it has been recorded that the GDP and per capita was low due to the international financial crisis 2008 but the country has overcome the crisis and the growth rate is increasing gradually. Germany has become stable than other euro countries (OECD, 2018).

The OECD (2018) reports also states that the export performance by the country is much more productive than other countries like France, Japan, UK and USA. When talking about inflation, there has been a steady increase in the inflation due to increase in oil rate, it was quite low 2009 and 2016 but now it is steady at 1.73% (OECD, 2018).  Moreover, in Germany Consumer Price Index (CPI) is among the major macroeconomic indicators to evaluate the financial value movements. When there is a percent change in CPI to the same year or month or the prior years is substantially known as inflation rate. So, CPI and inflation rate are related moves side by side, by looking in the above the CPI has been consequently increasing whereas there are fluctuations in the inflation rate (Moody’s Analytics, n.d.).

3. The German government has adopted a fiscal approach that has decreased a GDP deficit from 3.5 percent in 2010 to 0.3 percent in 2012. The government is trying to decrease the debt in the coming years and will be able to stabilize the budget from the year 2020. This will help the economy of the country to be steady (OECD, 2014). The German government has introduced Labor Market Policy that has helped the country to reduce unemployment. It has been significant that employment has been increasing since the introduction of this policy, there were total foutry-five million German employed in 2018 as compared to 2017 where total number of German employed were 0.55 million. There have been many opportunities for skilled and qualified labors to be employed in their desired field. The labor market policy introduced numerous employment temporary contracts that increased feasibility among the labours in the industrial sector (SGI, 2018).

Benchmarking:

2008. The country or group of countries used as a benchmark for Germany would the euro countries. The reason why this group is chosen for the country because both of them are European countries with same lifestyle and are neighbors. The analyses between the two would tell the readers how can Germany improve its economy and helps the citizens or where has Germany an upper hand among the other European countries. The analyses between the two countries can provide the client as to why he should invest in this country. The European countries include France, Netherlands, Spain, UK, Greece and Italy. The currency of these countries are euro, almost every country was impacted the financial crisis in 2008.
2009. When comparing Germany with other European countries there has been differences in terms of the values of the macroeconomic indicators. When talking about GDP growth among these countries, the highest GDP euro share is of Germany that is 29% whereas other countries like France has 20%, Italy has 15% and Spain has 11% (Cleaud, de Castro Fernandez, Lagune, Granelli, Hallet, Jaubertie, Rodriguez, Ognyanova, Palvolgyim Tsalinski, Weibschadel & Ziemendroff, 2019). The unemployment rate of Germany is the lowest that is 3.3% whereas it is high in other countries like in France it is 8.3%, in Greece it is 19.3% which is the highest. In Italy it is 10.5%, in Netherlands it is only .01% less that is 3.4%, in Spain it is 14.9% and in UK it is 3.6%. The client can easily invest in the country because the labours of Germany are quite qualified and skilled that can help him in establishing a business if he wants. Nevertheless, the client will be happy as his investment would give him profitable return (DU Statistics, n.d.). Moreover, Germany is one of the largest member countries in the European Union and the fluctuations of the euro currency also primarily depends on how stable is the economy of the country. Germany is a better country to invest rather than other countries because every macroeconomic indicator is balanced.

Beyond Macroeconomics:

2011. Currently, all around the world there are many environmental issues that has an impact on the countries’ development. The most occurring environmental issue today is carbon emissions from the developed countries from their industrial sector. Due to recent awareness of the carbon emissions and how it affects the climate many of the countries including Germany have tried to reduce the emissions. Germany was the first country to stand against carbon emissions since the start of the century and have motivated other countries to reduce their carbon emissions. The country has started using alternative sources of energy like solar power to produce electricity rather than coal. The use of natural gas has also declined in Germany; however, the country is trying to decrease the use of nuclear energy after the incident in Japan in 2011. Moreover, there has been an almost 31 percent reduction in gas emissions after twenty eight years and the country has aimed to decrease it by fifty five percent. However, the use of alternative sources has been really delicate because the use of natural gas is really common in households. The 2020 goals are much strict and it is really hard to achieve such goals by the year 2030 (Wiles, Warren & Parkin, 2018). To reduce this much carbon emission the country adopted environmental policies to tackle the issue and was successful in doing so. The country is now making recycle products that are of high demand around the world due to the awareness of the issue regarding non-recyclable products (OECD, 2014). The economy has been quite stable since the reduction in the carbon emissions as the country is using alternative sources of energy to run its industrial sector (Alexander-Kearns & Cassady, 2015).