Analyzing relationship between inflation rate and per capita GDP growth

Essay by khayalaUniversity, Master'sA+, April 2010

download word file, 7 pages ( 652 KB ) 3.0

Student number: 0903642

Program: Financial and Economic Sector Policies

Course title: International Macroeconomics and Policy

Assignment title: Analyzing relationship between inflation rate and per capita GDP growth

Introduction

There have been different theories for explaining crucial relationship between inflation and per capita GDP growth. In this paper we will consider the neoclassical model and wage equation. This approach is very useful in terms of flexibility to understand underlying assumptions behind the theory. Along with this, this model does include the adjustments in real wages, which is very important while determining relationship between unemployment, inflation and growth. To prove that this theory holds in practice we will examine a country based example. For this purpose we will analyze some macroeconomic data of Azerbaijan and try to link them to see how the theory works in reality.

In the first part we will have a look at some theoretical issues and describe the relationship between inflation and unemployment, and then inflation and per capita GDP growth.

The second part deals with economic processes that have been happening in Azerbaijan during last few years. Obviously, to understand the essence of macroeconomic statistics and some correlations and deviations from theory it is very important to know some key facts about economy. And finally, in the third part, we will look through some statistics and figures and try to observe theoretical issues in practice.

Neoclassical wage equation, Philips curve and Okun's law

_1322091346.xls

Диаграмма1

20.8
16.7
8.3
9.6
6.7
2.2
Philips curve

Лист1

Philips curve
6.120.8
6.516.7
6.88.3
7.69.6
8.46.7
9.72.2

_1322102573.xls

Диаграмма1

2.2
6.7
9.6
8.3
16.7
20.8
Inflation rate

Лист1

Столбец1Inflation rate
20032.2
20046.7
20059.6
20068.3
200716.7
200820.8

_1322102690.xls

Диаграмма1

896
1060
1600
2500
3900
5400
GDP per capita

Лист1

Значения ХGDP per capita
2003896
20041060
20051600
20062500
20073900
20085400

_1322102779.xls

_1322100178.xls

Диаграмма1

5400
3900
2500
1600
1060
896
Okun's law

Лист1

Okun's law
6.15400
6.53900
6.82500
7.61600
8.41060
9.7896

_1322100890.xls

Диаграмма1

2.2
6.7
9.6
8.3
16.7
20.8
GDP per capita versus inflatiоn

Лист1

GDP per capita versus inflatiоn
8962.20
10606.70
16009.60
25008.30
390016.70
540020.80

_1322089778.xls

Диаграмма1

9.7
8.4
7.6
6.8
6.5
6.1
6
Unemployment rate

Лист1

Столбец3Unemployment rate
20039.70
20048.4
20057.6
20066.8
20076.5
20086.1
2009 (est)6