Specifically, you have been asked to compare the impact of Covid on the Macroeconomy on both a large economy and a smaller developing economy (this country is not limited to those listed in the article but would need to be a smaller economy that trades with one of the large economies such as the US or China). You are also asked to examine the macroeconomic interdependencies between the large, developed economy and their smaller trading partner. From your findings what can you deduce about inequality in economic recovery as we move to the second part of 2021.
Use concept such as:
What has been GDP growth / unemployment / inflation in recent quarters? What are the major policy concerns for both economies.
Balance of payments What does the balance of payments indicate about the economies net wealth – what have been recent changes or trends in the balance of payments in the respective economies and what are the key drivers of that change.
What does this imply about the countries approach to trading consumption across time – historically have they been net lenders / net borrowers.
Has COVID resulted in any major changes in Balance of Trade / the CA / the financial account – (magnitude of change in both economies)
How sensitive is the economy to changes in the exchange rate?
How might a change in the exchange rate impact of the trade balance.
How might a chance in the RER come about (change in e or relative prices) Estimate which quadrant of the SWAN diagram your country of choice may be operating in?