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MONEY AND BANKING

ECO 2115

FALL 2023

ASSIGNMENT 1

DEADLINE: October 19, 11:30PM

All electronic files (PDF and Excel) to be returned on Brightspace in the assignment 1 space

Please start this assignment early in case you have questions. If you wait until the last minute, we might not have time to get to your questions by the deadline. Please ask your questions in the forum.

Professor: Marc Prud’Homme

Instructions: Please respect to avoid serious penalties This is an individual assignment.   You can however consult each other to work on the assignment but you must return your own individual copy. Under no circumstances can you submit your assignment by email; you must  submit it on Brightspace. Tardiness will be penalized at the rate of a 10% deduction per day up to a maximum of 2 days after which time no assignments will be accepted. Include with your    working document a typed cover page that is produced with a word processing software such  as MS Word or Pages; do not submit a handwritten cover page. Your last name (family name)   should be in caps (capital letters) so that we can best identify you (do not capitalize your given

name.) A sample title (cover) page can be found in this document on pages 18 - 19:

https://socialsciences.uottawa.ca/public-international-

affairs/sites/socialsciences.uottawa.ca.public-international-affairs/files/guidelines- 20110217/WritingandStyleGuide2010-2011_001.pdf

I would also like to point out that a subset of the exercises will be corrected and not the entire

assignment due to lack of resources. However, you must attempt all the exercises, otherwise

points will be deducted for incomplete work. A full set of solutions will be made available soon which you can consult in preparation for the exam.

Note for some targeted exercises (to be identified in the question if any exist), the graphs and

tables that you produce in MS Excel will need to be included in your working document (this is  your Word processing document in MS Word or other similar software). There are several ways to go about transferring charts and tables from an Excel file to the working document. Here's an example (the same basic approach is used if you are using other similar word processing software such as Pages by Apple):

https://support.microsoft.com/en-us/office/insert-a-chart-from-an-excel-spreadsheet-into-word- 0b4d40a5-3544-4dcd-b28f-ba82a9b9f1e1

This is not the only source of information on how to transfer graphs. If you need more help start with Google.

You can also resize your graphs and tables so that they can fit on the page of your document. Always include labels on your charts labels to identify axes, the name of the series and a title. Tables should always include a title.

One of the goals of these exercises is to assess your ability to find data, so please don't ask me  where the data is, as that defeats the purpose of the exercise. If it proves impossible to find the requested data (unlikely), then simply skip the question.

With every assignment you will be asked to submit in Brightspace the following:

1.   A copy of your working document, which is typically produced in MS Word (or Pages)   and then saved as a PDF file. You MUST submit the PDF file, otherwise we might not be

able to read your file and grade it.

2.   Your MS Excel file.

Additional guidelines for submitting the assignment:

Please observe the following advice/instructions to avoid point deductions (note there is some repetition from above):

1)   Work submitted by email will not be graded.

2)   Do not return your documents in a ZIP file.

3)   When you are asked to do calculations in the Excel file, you must use the formulas in MS Excel to perform them. You should never just write a result in a cell which requires a

calculation. You need to calculate the result using the Excel formula.

4)   When you apply an Excel formula, you must use the cell addresses in the formula and not use the numbers taken directly from a cell in the table.

5)   You have a grace period of two days after the deadline to return the assignment but with penalty. Delays will be penalized at the rate of 10% per day (maximum tolerated of 2

days). After this date, the window for returning the work will be closed and it will be impossible to submit the TP regardless of the motivation.

6)   Backup your files to one of the many services that exist in the cloud since there are no exceptions to deadlines in case you have technical problems that prevent you from

submitting the work on time.

7)   If you have any questions, please ask them in the forum for a timelier response. Do not

communicate by email any questions about the assignment. Note that your question was perhaps already asked in the forum and has been answered. Therefore, please peruse the forum before asking your question.

8)   Also be clear in the subject heading of the Forum posting when submitting a question, e.g., Problem 2 B: How to calculate such and such a result.

9)   It is advised to start the assignment earlier than later. That way, if you have any

questions, they have a better chance of being addressed in the forum before the

deadline. This will also avoid penalties for late submissions in case of ill health. Recall  that there are no extensions past the 2 day grace period in case you are sick during this time or for any other reason.

10) In addition to saving your graphs in your working document (unless otherwise

specified), all graphs constructed in Excel should be saved on a separate sheet within  your Excel file as per this method:https://www.youtube.com/watch?v=mD28breAR2g

(this is explained about 1 minute into the video)

11) In the MS Excel template, do not move or change the parameters (the way the page is set up) that appear in this file. Simply fill in the blanks without moving or changing the set   up or layouts of these various sheets. Include your answers in the cells that have been

reserved for this purpose (look for the yellow highlighted cells).

12) If and when searching for the Statistics Canada V number codes (you will know what I mean when you see them in the problem statements below) you start by going to the

Data link on the Statistics Canada home page (https://www150.statcan.gc.ca)  once

there, look in the right hand corner and you will see a box that reads “Search by Vector” . Once on that page you can enter the vector numbers as they appear in the exercises to

find your data. However, once on that page, you will need to click on the number that  appears under the SOURCE heading in the box to have access to the full historical data needed to complete some of these exercises.

 

Once on that page you can enter the vector numbers as they appear in the exercises to find your data. However, once on that page, you will need to click on the number that appears under the  SOURCE heading in the box to have access to the full historical data needed to complete some    of these exercises.

 

You will now find yourself on a page like the one in the image below. From there, you click on the ADD/REMOVE DADA button. You will be offered choices for the data series and the periods which are relevant to the requested data.

 

Note that some series will have a “+” sign next to them. Press on it to expand your data choices.

 

You will have many choices of formats for downloading the data. Pick this one.

 

13) In your calculations, limit the number of digits for your answers after the decimal to one (e.g., 12.1 and not 12.1234) unless otherwise specified.

14) Note that you are new to MS Excel, there are several YouTube videos on how to use this tool.

15) Use the following naming conventions for all your files: Family name_student number.pdf. For example: Prudhomme_11111111.xls

16) Failure to respect these instructions will result in a penalty.

To learn more about Statistics Canada data and how to download the data please look at these links:

https://www.statcan.gc.ca/eng/developers/csv/user-guide

https://www.statcan.gc.ca/eng/about/website-faq

https://www.youtube.com/watch?v=8u1I8AWL-Q0

https://www.youtube.com/watch?v=4jdlqFu6Yak

1.   The pandemic and the economy

Extract the data below for Canada to construct six separate line charts that show the effect of the 2008 financial crisis and the pandemic on some key economic indicators. Note that the

series codes (V codes for the Statistics Canada series, for example) are not provided. You

need to do some digging to find these series in Statistics Canada’s data portal (it is on the SC homepage). Put your downloaded series on corresponding sheet in the Excel template (Q1a  to Q1f) and perform your calculations (if any are required) on its sheet. The graphs should

cover the period starting from 2005 (either the first month or the first quarter of 2005

depending on the series that is requested because some series are produced monthly and

others quarterly), to the latest period for which the data are published by Statistics Canada. Note that when calculating percent changes, the resulting calculation will appear later than the first data point. For example, the result of the percent change from January 2022 to

January 2023, is not positioned at January 2022 but at January 2023.

Label your axes in the chart and include a title to the charts. Each graph should be saved on

its own separate sheet in your Excel like it is explained here:https://www.excel-                 easy.com/examples/chart-sheet.html. Follow these instructions clearly and do not simply

paste the chart into the sheet. Give a name to the sheet that corresponds with the question. For example, name the sheet for a): Chart 1). Do not forget to include the periods in your    Excel sheets.

a)   Chart 1: Quarterly % change of Canada’s real GDP (seasonally adjusted at the annual rate) by the expenditure approach in chained dollars (2012).

b)   Graph 2: Monthly unemployment rate for Canada (finer geographical breakdowns are available but only provide the series for Canada).

c)   Graph 3: Monthly employment rate at the Canada level.

d)  Chart 4: Monthly Stock Index - S&P/TSX Composite Index.

e)   Chart 5: 12-month % change of quality adjusted house price indices at the

Canada level or composite level. (There are two (non-StatsCan) producers in Canada of such series, choose one of them). You maybe required to register  with one of the providers' websites to download their series, however access to these data is free. Note: Statistics Canada produces a New House Price

series; this is not one of the two series that we are looking for here because the data in my view is questionable.

f)    Chart 6: 12-month % change (month t compared to month t - 12) in the All- items CPI for Canada. This % change is in fact the common measure in

Canada for the inflation rate.

2.   From the textbook in the Data analysis section in Chapter 1 (at the end), complete the following:

Exercise 1 – Start both series in January 2000 such as is stated in the textbook exercise but extend your series to latest available period. See the MS Excel template for details. This    period is different than that of the book so that we can have access the most recent data    available. Include your data and do your calculations on sheet Q2. Save your graph to

on a sheet named Graph Q2 as instructed above. Answer parts a) to c) in your MS Word document.

3.   Inspired from the textbook question in the Data analysis section at the end of Chapter 2,  Exercise 1. Complete the requested series on the Excel template on sheet Q3. In addition, answer the following:

a.   Which bank asset increased the most over this period? Write the answer in your MS Word document which you will convert to PDF before submitting. Provide a

possible explanation for this result.

b.   Which bank asset increased the least (which would include decreases). Write the answer in your MS Word document which you will convert to PDF before

submitting. Provide a possible explanation for this result.

4.   Explain why you will be more or less willing to buy a share of Apple stock in the following situations?

a)   A fall in your wealth.

b)   You expect the stock to appreciate in the future.

c)   The bond market becomes more liquid.

d)  You expect gold to appreciate in the future.

e)   Prices in the bond market become more volatile.

5.   Explain what effect a large federal deficit should have on interest rates. Support your answer with a graph.

6.   In the aftermath of the global economic crisis that started to take hold in 2008, Canadian

government budget deficits increased dramatically, yet interest rates on Canada bonds fell sharply and stayed low for quite some time. Does this make sense? Why or why not?

7.   Will there be an effect on interest rates if brokerage commissions on stocks fall? Explain

your answer.

8.   Complete the following exercises from Chapter 4 in your working document.

a.   Q14 (Also complete in Excel on sheet Q8a – use Excel’s financial functions for calculations)

b.   Q6

c.   Q16 (Also complete in Excel on sheet Q8c – use Excel’s financial functions for calculations)

d.   Q18 (Also complete in Excel on sheet Q8d – use Excel’s financial functions for calculations)

e.   Q19 (Also complete in Excel on sheet Q8e – use Excel’s financial functions for calculations)