Exercises of Methods For Applied Economics

Practical exercises to do at the computer
classroom (all groups)
Course: Methods for applied economics
2nd degree course in Economics

Academic year 2010-2011
Department of Applied Economics II

Universidad Complutense de Madrid
Exercise 1
Stages of growth of the Spanish economy in the period
1960-2009
Many techniques are available to identify the phases or stages of a country's economic
growth. This exercise illustrates one of these techniques and applies it to the data of the
Spanish economy in the period 1960-2009.
The procedure is based on estimating the trend evolution of the GDP per capita
(GDPpc) during the whole period 1960-2009. It allows us to establish growth stages
through the comparison between the observed and trend GDPpc. This comparison
identifies periods in which the GDPpc grows at the same rate as the trend GDPpc as
well as periods where growth is below or above the trend growth. This technique is very
useful to recognize the fluctuations that occur in the growth of an economy. It is simple
and is based on the estimation of an equation that measures trend growth by using
Ordinary Least Squares.
Data will be downloaded of the data bank Spain web site:

http://www.BDE.es/
Statistics
Synthesis of indicators
Spain
Structural indicators of the Spanish economy and EU
Series table 1.4
The first activity to be performed is to download the file into a spreadsheet. You must
download it so that it is formatted properly and information can be seen properly in the
file.
The file contains 189 variables on very diverse aspects of the Spanish economy during
the period 1960-2009. It is important to save and preserve this file that can be used at
different times in the course.
The variable to be used in this exercise 1 is:
SI_1_4.2: GDPpc constant 2005 (PPP, in EUR thousands)
Open the file as an Excel file and proceed as follows:
- Transform series taking logarithms: Ln (GDPpc).
- Generate a variable that will be called trend t, taking the values 1, 2, 3, 4, 5…….
50
- Calculate the trend GDPpc by estimating (using OLSQ) the following equation:
Ln (GDP pc) = a+bt,, where a is a constant and t is the trend variable defined
above. Using Excel (routine: regression), we estimate the following equation:
Ln(GDP_pc) = 1,896607 + 0,027477 t, where t is the variable trend.
- Generate the trend GDPpc based on coefficients a and b estimated in the

previous recession.
- Get the difference between the observed GDPpc, Ln (GDPpc) and the trend
GDPpc previously estimated.
With the elaborated information:
1. Draw a graph to represent series of observed and trend GDPpc.

2. Draw a graph that represents the difference between observed and trend GDPpc.
3. Write a brief text (about 300 words) which proposes main stages of the Spanish
economy growth since 1960 to 2009, based on the two elaborated graphs.
Include both graphs next to the text.
Exercise 2
Comparison between the growth of the Spanish
economy and countries of the Economic and Monetary
Union (EMU): 1960-2009
An alternative method of analysis of growth consists of making comparisons. In this

exercise Spanish economy growth is compared with the rest of EMU countries
(Germany, Austria, Belgium , Spain, France, Finland, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Greece, Slovenia, Cyprus and Malta). The comparative analysis
is a source of important knowledge. Many sciences build taxonomies and classifications
by using comparisons. In economic science, the comparison is also very useful: by
comparing growth between countries we can elaborate classifications and taxonomies
that allow us to identify similarities and differences. By using them¸ we can start to
discover the features of a country's economic growth. In this exercise we are going to do
a simple exercise of comparative analysis between the Spanish economy and countries
that are members of the EMU.
The variable is contained in the file downloaded in exercise 1: "GDPpc constant 2005
PPP. Relationship Spain/EMU", SI_1_4.68. This variable measures, in percentage, the
relative GDPpc of Spain to all EMU countries.
Firstly, draw such variable in a graph. Then, identify periods of convergence and
divergence between Spain and EMU countries. Compare the periods identified with this
method and the method of trend GDP. Summarize their findings in a text of
approximately 300 words (a folio), including the graph representing the relative GDPpc.
Exercise3
TheuseoftheQuarterlyNationalAccountsto
analysethesituationoftheSpanisheconomy
ThelastavailabledatathatprovidestheQuarterlySpanishNationalAccounts(QSNA,
CNTRinSpanish)ontheSpanisheconomyindicatesthatthethirdquarterof2010GDP
hadaninterannualvariationof0.2%andquarterlyvariationratewaszero(0.0%).
Fuente: Contablidad Nacional Trimestral
Last press release in which the INE reported about the Quarterly National Accounts
reproduced the following graph:
The graph describes the evolution, quarter to quarter, of annual growth rate of GDP in
Spain, countries in the EMU and 27 countries comprising the EU. The graph describes
the profile of the recession in Spain and the two sets of countries, as well as the cyclical
phase at the end of the year 2010. The CNTR information is essential for the analysis of
the situation.
This exercise aims to identify fluctuations in Spanish economic growth based on the
CNTR information and familiarize with some useful concepts for economic analysis.
The data will be downloaded from a data file at the web site of the National Institute of
Statistics (INE):
http://www.INE.es/
inebase
Economy
Economic accounts
Quarterly Spanish National Accounts
QSNA Base 2000. Series from quarter 1/1995 up
to last published quarter offer (volumen… index)
Activities to be performed:
- Select the variable: GDP pc (chained volume index) for the period 1995/Q1-
2010/Q3. Download the file into a spreadsheet.
- Distinguish between non-adjusted data and seasonal and calendar effects
adjusted data
- Calculate the following growth rates:
o Quarter-to-quarter growth rate: ((yt/yt-1)-1) * 100
o Annual growth rate: ((yt/yt-4)-1) * 100
With the obtained information do the following activities:

1. Draw up a first graph representing the quarter-to-quarter growth rate of the
Spanish economy in the period 1995-2010
2. Elaborate a second graph which represents the annual growth rate of the Spanish
economy.
3. Write a short text identifying the quarters that the Spanish economy has been in
recession between 1995/Q1 and 2010/Q3. Comment about the relevant dates of
the recession that the Spanish economy has gone through in the last 15 quarters.
Maximum length of a folio (approximately 300 words). Include two graphics
with the text.
Optional activity:
A third useful indicator in the cyclical analysis is "annualized quarterly growth rate":
(((yt/yt-1) ^ 4) - 1) * 100. The advantage of this indicator is that it is comparable with the
annual growth rate and also gives us more updated information than the annual rate on
the behavior of the economy. Draw a graphic that represents the inter-annual (year-to-
year) growth rate and the quarter-to-quarter annualized growth rate of the Spanish
economy. Comment briefly on both.
Exercise 4
SpanishNationalAccounts
ThelastPressReleaseoftheSpanishNationalAccountsprovidesthenextfigure:
(Note:Updatingofeconomicvariablesisasystematicpracticeaimedatincorporating
definitivedataonthoseoperationswhichhadpreviouslyestimatedwithprovisionalor
advance data, as well as the incorporation of structural statistical sources that were
notavailableatthattime)

Thisexercisewillshowhowtogetthoseratesaswellasotherinformationthatis
implicitinthosedata.
ThedatawillbedownloadedfromadatafileinthewebsiteoftheNationalInstituteof
Statistics(INE):

http://www.INE.es/
inebase
Economy
Economicaccounts
SpainNationalAccounts
Accountingseries1995Ͳ2009
GDPatmarketprices
Basedontheinformationobtainedfromthedownloadeddata(Tables1to5)ina
spreadsheet,obtainfortheperiod1996Ͳ2009:
1. The index for the GDP at current prices, with base on year 2000, in two
different ways: by using the original GDP data (first) and by using the year-
to-year growth rates (second).
2. The value of GDP at constant prices of 2000
3. The value of GDP at constant prices of the previous year
4. The inter-annual growth of prices.
5. Price variations with respect to the year 2000
6. Finally, graph the GDP at current and constant prices (base 2000), only for
the period 2000-2009.

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Practical exercises to do at the computer

classroom (all groups)

Course: Methods for applied economics

2nd degree course in Economics

Department of Applied Economics II

Data will be downloaded of the data bank Spain web site:

Open the file as an Excel file and proceed as follows:

- Transform series taking logarithms: Ln (GDPpc).

- Generate the trend GDPpc based on coefficients a and b estimated in the

With the elaborated information:

1. Draw a graph to represent series of observed and trend GDPpc.

An alternative method of analysis of growth consists of making comparisons. In this

Fuente: Contablidad Nacional Trimestral

With the obtained information do the following activities:

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