Intermediate Econometrics - 5QQMN938
Assessment 1– Individual Coursework
(40% of total module grade)
The Task
Project Brief
The global economy has recently experienced a period of inflationary pressure characterised by a complex set of political and socio-economic events. The Covid-19 pandemic’s lockdowns resulted in forth-and-back switch from goods to services as economies reopened. These swift changes put pressure on the supply chains and occurred during unprecedented fiscal and monetary stimulus. The Ukrainian-Russo conflict since 2022 has only exacerbated the pressure. By mid-2022, global inflation had tripled relative to its pre- pandemic level. Policymakers around the world have responded, resulting in a global tightening cycle, or “Great Tightening”. The International Monetary Fund (IMF) recently wrote:
“As global disinflation continues, services price inflation remains elevated in many regions, pointing to the
importance of understanding sectoral dynamics and of calibrating monetary policy accordingly.”
Source: IMF World Economic Outlook October 2024
In this project you will become an inflation forecaster for a country in a selection of global economies (see “Country Allocation” below). Your analysis will be to analyse the total inflation rate as well ascore inflation. You will provide some background and context to recent and historical trends in inflation, select between econometric forecasting models and make forecasts of total and core inflation in 2025Q1. The dataset “MajorCountries.xlsx” contains data on the total and core consumer price index (CPI) for 08 selected countries. Each series is taken from the national source and was downloaded from the aggregator Macrobond. The data are quarterly, and the dataset contains all available observations until the present.
Your task is to produce an A4 poster which can be used as your economy’s “Quarterly Inflation Update” and presented at an economic forum on inflation. The poster should be visually appealing and convey all of the information in a concise way. The design and layout of the poster is up to you (short text, graphics, tables, equations, infographics etc. are all allowed). The poster should have the following basic structure:
Data Analysis: Provide background and context to total and core CPI inflation in your country (using the quarter-on-quarter inflation rate), identify any notable historic movements and analyse the series’ recent time series behaviour. Further concise and relevant discussions are encouraged.
Econometric Modelling: Select and report appropriate forecasting models for the two CPI inflation rates, using primarily the BIC to select between all AR(p) models with lags of p from one to four. Discuss and critically evaluate the models and the limitations of the modelling approach.
Forecasting: Produce and graphically display the forecasts for the two inflation rates for the period 2025Q1. Evaluate the forecasts and their uncertainty and make a conclusion in the context of the global economic situation.
Appendix: Provide all Stata codes used in the analysis. These can be placed on a separate page after the A4 poster. The provision of Stata codes which replicate all of the results in the project is a minimum requirement. Students who wish to explore using different coding languages can do so, but it will not attract any additional grades.
Examples
The format and design of the poster is up to you. However, you may take inspiration from posters you find online. For example, the STEM for Britain poster competition. This gives examples of similar research posters. It is up to you to judge whether they look good or bad! Pay particular attention to their use of headings, colour, sparing use of text, graphics and infographics, presentation of graphs, tables and equations. Refer to Keats’s marking criteria for more.
Submission
The final submission should only include the cover sheet, the A4 poster (one page) and an appendix with Stata codes (fit to one page, you can use two columns if necessary). The total submission should therefore not exceed two sides of A4 after the cover sheet. There is no specific word limit for the poster as this will include visual elements, but you are strongly recommended not to exceed 300 words of text (this does not apply to the Stata appendix of cover sheet). Bear in mind that part of the marks for the project is awarded for presentation (see “Marking” below) where very concise discussion and summary is preferred. Before submitting a poster, which looks like an essay, check the marking criteria (posted on Keats) for the project.
The use of an A4 poster must be strictly followed. You must submit a pdf of the document to Turnitin. If you use Microsoft Word, you should export this to pdf first using File->Export. For Equations or Mathematical Notations, you can use Insert/Equations for professional formatting.