Assessment 3 Assessment Type: Research Report: XXXXXXXXXXwords report – Individual assessment Purpose: To enable students to research, critically analyse and evaluate the macroeconomic performance of...

Evaluation of the effects of Macroeconomic variables on Australian economy
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Contents
Summary    4
Introduction:    5
Review of literature    5
Macroeconomic Performance of Australian Economy    6
Real GDP growth rate    6
Unemployment Rate    7
Inflation Rate    8
Growth rate of Net Exports    9
Interest rate    10
Exchange rate    11
Multiple Regression analysis    11
Interpretation    12
Monetary policy and Australia economic growth rate    13
Conclusion    14
References    15
Summary
The report focused on evaluating the effects of Macroeconomic variables such as exchange rate, real interest rate, inflation rate, net export, unemployment rate on Australian economic growth through graphical and empirical analysis for the period 1990 to 2018.Emprical analysis is conducted by conducting multiple regression for evaluating the effect of exchange rate, real interest rate, inflation rate, net export, unemployment rate on real GDP growth rate. The result suggests that there is a significant negative relationship between rate of Unemployment, and Net export on Australia’s growth rate.
Introduction:
Performance of Australian economy is identified by the analysing the variables such as Real GDP, unemployment rate and inflation rate. Real Gross domestic product (GDP) tells us about the value of final good and services produced in Australia. Unemployment rate tell us the percent of labor of who are jobless in the nation. High unemployment rate indicates that the nation economic condition is weak while low unemployment rate indicates the nation economic condition is strong. Inflation rate is indicated by consumer price index of an economy. If consumer price index is rising over the period of time indicates that there is inflation in the economy. If consumer price index is falling over the period of time indicates that there is deflation in the economy. Let us evaluate effects of the above Macroeconomic variables on Australian economy for the period 1990 to 2018
Review of literature
Henry and summers (2007) This paper examines the extent to which fluctuation in economic growth of Australia are affected by the domestic and overseas economic performance. Through regression model analysis they found the mechanism which spreads the business cycle to Australian economy was non linear. They also found that large negative shocks are most persistent which led to greater uncertainty in the economy and have large impact on growth rate of Australia’s economy.
Jha and Dang (2011) this paper analyzed the effect of inflation variability and economic growth of developed and developing nation by using secondary data. They conducted the analyzing by using data sets of 182 developing nation and 31 developed nations. Result of econometric model indicates that there was a significant evidence for developing countries and for developed nation there was no significant influence of inflation variability on growth. They found that there is a negative effect of inflation variability on growth when the inflation rate is high; particularly, when the inflation is higher than 10 percent, an increase in inflation is followed by a decrease in growth only when the rate of inflation was stable.
Bhar and Mallik (2012) This study examines the relationship between economic growth, inflation , uncertainty of inflation and growth. They obtained data on Australia from International financial statistics of the international monetary fund for the year 1957 to 2009 and employed multivariate EGARCH model for the analysis. They found that the uncertainty of inflation has significant and negative effect on output growth and inflation and they identified that oil price has significant effect on increase in inflation uncertainty in the nation.
Pandya and Sisombat (2017) paper examines the impact of foreign direct investment (FDI) inflows on economic growth of Australia. They employed time series data of thirteen years which is from 2001 to 2013 for the analysis. Multiple regression were conducted by using those data to determine the relationship between Australia’s economic growth and foreign direct investment flow. The result indicates that the inflow of FDI has positive impact on Australian economy which includes growth in export performance, employment and GDP. They also found that the sector of Mining and quarrying attracts large amount of FDI and contributes to 7 percent of Australia’s GDP.
Hsing (2019) the study analyzed whether expansionary monetary and fiscal policy has impact of on output in Australia. Annual data for the period 1990 to 2018 were used for the analysis .They applied IS LM model in the analysis and included real effective exchange rate and real stock price for analyzing substitution or wealth effect .This study found that expansionary monetary policy increases output and expansionary fiscal policy has negative effect on Australia GDP growth .Output increases when there is a lower expected inflation, a higher real stock price, a lower U.S. interest rate, real appreciation of the Australian dollar.
Macroeconomic Performance of Australian Economy
Real GDP growth rate
From above growth rate of real gross domestic product graph we can say that Australia growth rate decreases from 4 per cent to 0.5 per cent during 1990 to 1993, after that the growth rate of real GDP started to rise till 1999.In...