You will find below the detail of your end of the semester assignment
The objective of this assignment is to analyze the exchange rate evolution of new-zeland against the US dollar over the period 2003-2013 and determine if it is over or undervalued.
Based on the conceptual framework given in lecture 1 and lecture 2, you should present the evolution of the exchange rate since 2003 and explain the reasons for this evolution. As an example you should read the following case study http://economics.about.com/cs/money/l/aa022703e.htm.Data are to be taken from the World Bank Database website (World Development Indicators) http://databank.worldbank.org/…/varia…/selectvariables.aspx…
Answer the following questions:
1°) Plot the evolution of the exchange rate against the US dollar since 2003. Explain if it has appreciated or depreciated over the period.
2°) Give the PPP level (PPP conversion factor, GDP LCU per international $) at the end of the period for your country (no chart, only the figure for 2012). Explain the meaning of this number and interpret .
3°) Plot on one unique graph, the year on year CPI change (in percentage) for the USA and for your country since 2003. On another graph, plot the relative PPP since 2003 as well as the FX rate (take year 2003 as base 100). Comment .
4°) Plot the evolution of the current account balance since 2003 as a percentage of GDP (1 decimal place). Do the same for the evolution of the exports of goods and services as well as for the imports of goods and services. You should find the composition of the current account balance (what are the main constituents of exports and imports). Based on the information you have gathered, analyze and explain the evolution of the current account balance.