Economics Group Project. Bisrat kinfemicahel. airline analysis PDF

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Economics Group Project. Bisrat kinfemicahel. airline analysis...

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New York Institute of Technology

Macroeconomics Project

ECON 202 - M01 Prof. Bisrat Kinfemichael 04.30.2020

Part 1. I.

Russian economy: Russian Federation is a transcontinental country, its territory extends from Europe to Asia. The geography of this country is essential to the country's economic activity. Russia is the largest country with an area of 17,125,200 kilometres2 or 6,612,100 miles2 (Terry, 2018). Therefore Russia contains over 30% of the world’s natural resources. With an advantage of natural resources, natural gas production is ranked number one in the world and the third largest producer of oil. (Korabik, 1997). Rather than that, Russia is known for how the government controls its mix and transitional economy, which can be defined as the transition from a centrally planned economy to market economy. Based on the data contributed from the World Bank, Russia is considered an upper middle universal income country. A. Russian GDP: Table 1: Gross Domestic Product (based year: 2016) Subject Descriptor

real GDP

Exchange Value

real GDP

real GDP per capita

Inflation

Unemployment rate

Units

National currency

Percent change

Dollar currency

National currency

Index

Percent of total labor force

Scale

Billions

Billions

unit

2010

78,571.2 ฀

70.2

$1,119.25

549,833.45

65.994

7.358

2011

82,551.7 ฀

70.2

$1,175.95

577,284.62

71.564

6.508

2012

85,606.2 ฀

70.2

$1,219.46

597,391.49

75.196

5.45

2013

87,147.2 ฀

70.2

$1,241.41

606,452.33

80.274

5.5

2014

87,757.1 ฀

70.2

$1,250.10

599,843.47

86.554

5.158

2015

85,731.9 ฀

70.2

$1,221.25

585,200.68

100

5.575

2016

86,014.2 ฀

70.2

$1,225.27

585,927.79

107.042

5.525

2017

87,416.4 ฀

70.2

$1,245.25

595,074.20

110.985

5.2

2018

89,387.5 ฀

70.2

$1,273.33

608,906.68

114.18

4.8

2019

90,356.4 ฀

70.2

$1,287.13

615,801.75

119.524

4.623

2020

92,046.4 ฀

70.2

$1,311.20

627,794.93

123.734

4.76

(International Monetary Fund, 2019)

Table 2: Annual Growth Rate of Russia National currency Dollar currency 2010 Value

78,571.2 ฀

$1,119.25

2020 Value

92,046.4 ฀

$1,311.20

Annual Growth Rate

1.77%

1.77%

Graph 1: Real Gross Domestic Product

Russian Trade: Russia has been the 14th largest exporter in the world. The data retrieved from 2017 shows that the main export goods from Russia is crude petroleum, 28.3%. (OEC, 2017). It has the second largest coal reserves, the eighth largest oil reserves, and is one of the largest producers of oil. It is the third largest energy user. Since the demand for medication and technology is significant in Russia, the most imported good is Packaged Medicaments, which represents 3.71%. This is followed by Cars with 3.47%.

Table 3: Russian Trade Year

Export trade

Import trade

Trade balance

2010

$384,018,100,834

$230,872,526,177

$153,145,574,657

2011

$506,019,488,463

$310,484,060,191

$195,535,428,272

2012

$480,164,826,010

$324,004,534,695

$156,160,291,315

2013

$507,047,151,947

$324,957,279,032

$182,089,872,915

2014

$449,509,107,174

$295,466,859,453

$154,042,247,721

2015

$316,871,039,550

$184,618,908,409

$132,252,131,141

2016

$269,617,745,272.2 $180,982,264,690.30

$88,635,480,581.91

2017

$341,706,328,733.5 $221,653,477,611.98

$120,052,851,121.50

(OEC, 2017)

II.

Chinese economy: The People's Republic of China is known for the largest population in the world with more than 1.428 billion citizens, and the second largest in the world by nominal GDP. By its political stance with a centralized government, China had its economic system practice as a centrally-planned system for generations. Recently, the economy of China has transitioned to a market-oriented economy. Making China become the world’s fastest growing economy (Schwart; Abrams, 2015). Similar to Russia, China has diverse natural resources with an estimated worth of $23 trillion, 90% of which are coal and rare earth metals. (Craig, 2017). But beside the growth of Chinese economy, the socioeconomic cost of environmental pollution is at an alarming rate.

A. Chinese GDP Table 4: Gross Domestic Product (based year: 2015) Subject Descriptor

real GDP

Exchange Value

Units

National currency

Percent change

Scale

Billions

real GDP

real GDP per capita

Unemployment Inflation rate

Dollar currency

National currency

Percent of total labor force

Billions

unit

Index

2010

¥47,853.47

6.28

$7,619.98

35,687.31

87.06

4.14

2011

¥52,399.55

6.28

$8,343.88

38.890.82

91.758

4. 09

2012

¥56,539.11

6.28

$9,003.04

41,755.87

94.186

4.09

2013

¥60,494.16

6.28

$9,632.83

44,791.85

96.658

4.05

2014

¥65,398.45

6.28

$10,413.77

47,812.18

98.58

4.09

2015

¥69,910.94

6.28

$11,132.32

50,858.38

100

4.05

2016

¥74,619.02

6.28

$11,882.01

53,965.77

102.003

4.02

2017

¥79,660.95

6.28

$12,684.86

57,306.74

103.592

3.9

2018

¥84,892.63

6.28

$13,517.93

60,838.36

105.767

3.8

2019

¥90,104.01

6.28

$14,347.77

64,352.04

108.206

3.8

2020

¥95,356.96

6.28

$15,184.23

67,888.94

110.838

3.8

(International Monetary Fund, 2019) Table 5: Annual Growth Rate of China National currency

Dollar currency

2010 Value

¥47,853.47

$7,619.98

2020 Value

¥95,356.96

$15,184.23

Annual Growth Rate

7.96%

7.96%

Graph 2: Real Gross Domestic Product

B. Chinese Trade: China has an advantage based on its geography which makes the country the largest exporter in the world. China exported $2.41 trillions in 2017. The most recent exports are led by Broadcasting Equipment which represent 9.6% of the total exports of China, followed by Computers, which account for 6.08%. For importing China imported $1.54 trillions of goods in the same year. The most recent imports are led by Integrated Circuits which represent 13.5% of the total imports of China, followed by Crude Petroleum, which account for 9.4%. Table 6: Chinese Trade Year

Export Value

Import Value

Trace Balance

2010

$1,750,400,000,000

$1,103,800,000,000

$646,600,000,000

2011

$2,037,500,000,000

$1,393,600,000,000

$643,900,000,000

2012

$2,115,400,000,000

$1,415,400,000,000

$700,000,000,000

2013

$2,247,600,000,000

$1,557,600,000,000

$690,000,000,000

2014

$2,368,800,000,000

$1,534,100,000,000

$834,700,000,000

2015

$2,372,800,000,000

$1,271,900,000,000

$1,100,900,000,000

2016

$2,269,400,000,000

$1,234,000,000,000

$1,035,400,000,000

2017

$2,411,800,000,000

$1,538,500,000,000

$873,300,000,000

(OEC, 2017)

III. Comparison and contrasting Russian and Chinese Economy

Graph 3: Real Gross Domestic Product As shown in Graph 3, in the last ten years China had a higher Real GDP compared to Russia and it continues to grow substantially, according to its growth rate. Being called the ‘‘world’s factory,’’ China’s market-oriented reforms led the country to an unprecedented economic performance, offering it the title of the world’s second largest economy by real GDP. In 2015, China’s real GDP weighted $ 7.619 trillion, Russia being down by $ 6.500 trillion. In the next ten years China managed to double its real GDP, while Russia increased it by just 17%.

Graph 4: Real Gross Domestic Product Per Capita

Before comparing GDP per capita, we should compare the population of China and Russia. In 2015 China had 1.406 billion people and Russia 144.9 million people (worldometers.info). China had almost over 10-times more population than that of Russia in 2015, nearly the same in 2020. However, Russia GDP per capita during 2015 was $8,336.19 and China was $8098.47. That means that Chinese GDP per capita is almost equal to the Russian one in 2015, only 3-times more than that of its neighbour. In 2020, Chinese GDP per capita passed the Russian one by 20%. Thus, since 2010, Chinese GDP per capita almost doubled, increasing by almost 90%, while the Russian one just by 14%. Graph 5: Unemployment Rate

In the last ten years Russia has seen a considerable decrease in unemployment, from 7.358 to 4.76, which means almost 2.6 percent. Compared to Russia, China maintained its unemployment rate more

constant, decreasing by 0.34 percent.

Graph 6: Inflation Inflation looks controlled in both countries, in spite of it being higher in Russia, and lower in China. Since 2010, Russia has seen an increase of 87% in inflation due to the forign exchange rate movements and also the increase in VAT (Value Added Taxes). Compared to Russia, China kept its inflation rate more constant, increasing it by 27%.

Graph 7: Net Export In terms of trade balance, China is the overall champion, nevertheless the Russian net export is also imposing. While Russian export is mainly based on energy exports, China has a more diversified and higher value added export economy which

put the country on top of the charts.

IV How are the countries influenced by developments in the United States? The respective markets of each government are intertwined and connected, whereas larger countries with larger markets have a bigger impact on the overall market. This includes countries like Russia, China and the United States of America. With the high level of productivity within America, the developments within the country have a lasting effect on the market. Some key developments include, technology, trade relations and the recent recession of 2008. Both Russia and China have both been affected by the developments in America. After a rocky history with the US, both Russia and the US have been able to overcome the past and engage in trade relations once again. Although that may hold true, there have been interesting exchanges between both countries. According to state.gov, “ Since 2014, the United States and our European and G-7 partners imposed sanctions on Russia…” This led to the recession that occured the following year, in 2015. This forced Russia to become more independent and rely more on the goods they produce and less on imported goods. China has been able to become the fastest country to develop economically due largely to its ability to trade relations to the US. After the recession of 2008, America fell out of being the primary world power. America took years to recover from the recession, whereas China was able to quickly recover due to its control over the market. Fast Forward to 2020, the global economy is more balanced with more countries amidst the top of it. Near the top, there’s countries like China and America. For most of the decade, America’s number one trade partner was China. According to the Library of Congress, t his is due to the value of China's exports, which includes advanced technology products. Over the recent years the large imbalance in regards to their bilateral trading have been addressed. This is due to China’s exports being much larger compared to America’s. This is the cause of the recent tariffs America has imposed upon Chinese exports, in an attempt to reduce the trading imbalance. Part 2. Convergence Test for US’ Accommodation and Food Services industry (Millions of chained 2012 dollars). This table presents the data of real GDP by 51 states in two different years, the natural logarithm of initial output (output in 1997), and the values of growth measured by Compound Annual Growth Rate (CAGR).

GeoName

1997

2019

Log of GDP in 1997 Growth Value by CAGR

Alabama

3526.3

5293.9

3.547319257

0.018640054

Alaska

1011

1270.3

3.004751156

0.010431907

Arizona

6677.5

10413.3

3.824613897

0.020402626

Arkansas

2085.9

3011.4

3.319293484

0.016831196

California

44766.1

75084.6

4.650949261

0.023785948

Colorado

6515.7

10538

3.81396108

0.022093857

Connecticut

4390.8

5564.6

3.642543656

0.010826995

Delaware

1118.6

1387.2

3.048674815

0.009830249

District of Columbia

2570.9

3917.5

3.410085184

0.019329796

Florida

24193.2

38547.2

4.383693316

0.021399011

Georgia

9961

13174.2

3.99830294

0.012789408

Hawaii

5361.4

6983.5

3.72927821

0.012087244

Idaho

1172

2089.3

3.068927612

0.026626376

Illinois

13835.1

21407.3

4.140982303

0.020040121

Indiana

5934.6

7805.7

3.773391452

0.01253494

Iowa

2832.4

3481.2

3.452154586

0.009419205

Kansas

3121.9

3429

3.494418988

0.004273966

Kentucky

4041.6

5535.2

3.606553329

0.014397526

Louisiana

5498.9

7469.1

3.740275822

0.014016709

Maine

1596.9

2420.8

3.203277721

0.019090566

Maryland

8204.3

9566.8

3.914041532

0.007008095

Massachusetts

9046.8

13810.3

3.956494989

0.019413473

Michigan

9276.6

12514.3

3.967388831

0.013701051

Minnesota

5523.1

7321.5

3.742182907

0.012894974

Mississippi

2688.9

3768.8

3.429574651

0.01546493

Missouri

6237.3

7610.9

3.794996633

0.009088049

Montana

1111.9

1603.4

3.04606573

0.016778112

Nebraska

1840.8

2212.8

3.265006606

0.008401387

Nevada

15243.4

18392.4

4.183081846

0.008572486

New Hampshire

1670.7

2585

3.222898473

0.020038251

New Jersey

14155.4

11885

4.150922146

-0.007914833

New Mexico

2329.9

2740.4

3.367337281

0.007403569

New York

26395.2

37910.8

4.421524957

0.016593156

North Carolina

8472.7

13526.2

3.928021829

0.021490358

North Dakota

690

992.8

2.838849091

0.016675585

Ohio

11518.8

14042.2

4.061407238

0.009044594

Oklahoma

3824.9

4562.2

3.582620085

0.008044578

Oregon

3712.6

6929.1

3.56967816

0.028769597

Pennsylvania

13315.6

14925.2

4.12436074

0.005200511

Rhode Island

1318

1919.7

3.11991541

0.017240267

South Carolina

4574.2

8002.7

3.66031515

0.02575084

South Dakota

911.9

1356.9

2.959947216

0.018229049

Tennessee

7395

11223.2

3.868938178

0.019143614

Texas

26895.1

43316.3

4.429673163

0.021899295

Utah

2262.5

3652.4

3.354588588

0.022007492

Vermont

1041.5

1463.6

3.017659274

0.015585533

Virginia

8398.9

11870

3.92422241

0.015847601

Washington

7729.9

14023.7

3.888173876

0.02744499

West Virginia

1633.8

2060

3.213198892

0.010591947

Wisconsin

5131...