THE EFFECT OF PERSONAL INCOME, BANK LENDING RATE, PPI, M2 MONEY SUPPLY AND EXCHANGE RATE ON CPI IN AMERICAN ECONOMY
ACKNOWLEDGMENT
First of all, we would like to give many thanks to our teachers, Ms Dieu Linh and Mr Hwun Choi for guiding us throughout this project. We had some difficulties in doing this task, but he patiently explained to us until we understand and know what we are supposed to do with the project work.
Then we would like to thank our families, for giving us the strength and health to do this project work until it has done. They provide us everything, such as money, to buy anything that is related to this project work and their advice, which is the most needed for this project. Internet, books, computers and all that are our sources to complete this project. They also supported and encouraged us to complete this task so that we will not procrastinate in doing it.
Last but not least, our friends who were doing this project with me and sharing our ideas. They were helpful that when we combined and discussed together, we had this task done.
Contents
I. INTRODUCTION 4 1. Economic theory 5 2. Data analysis 6 3. Data table 9 4. Choosing the model 12
III. TEST OF SIGNIFICANCE 15 1. Hypothesis testing: 17
IV. TESTING FOR ERRORS 17 1. Multicollinearity 17 2. Heteroschedasticity 18 3. Autocorrelation 21
V. LIMITATIONS AND CONCLUSION 22 1. Limitations 22 2. Conclusion 22
References 24
I. INTRODUCTION
Inflation is all the time one of the burning economic issues that generates the most concern from the society. So far, economists have developed a more specific concept called Consumer Price Index (CPI) as a main statistical indicator to gauge the inflation rate in a certain nation through its percentage change. Being stated by Mankiw in “Principle of Economics” (2009), CPI is the measure of the overall costs of goods and services bought by a typical consumer. Besides, the
References: Bank of England. (2011). How do interest rates affect inflation? Retrieved April 09, 2012, from Bank of England website: http://www.bankofengland.co.uk/education/Pages/targettwopointzero/inflation/ratesaffectinflation.aspx Bureau of economic analysis. (n.d.). Section 2 - Personal income and outlays - Table 2.6. Personal Income and Its Disposition, Monthly (M). Retrieved April 09, 2012, from Bureau of economic website: http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1# Bureau of labor statistics. (n.d.). Database and tools: Top picks. Retrieved April 09, 2012, from Bureau of Labor Statistics website: http://data.bls.gov/cgi-bin/surveymost?bls Federal Reserve. (n.d.). H.6 Money stock measures. Retrieved April 2012, from Federal Reserve statistical release: http://www.federalreserve.gov/releases/h6/hist/h6hist5.htm Federal Reserve. (n.d.). Selected interest rate (Daily) H.15. Retrieved April 2012, from Federal Reserve website: http://www.federalreserve.gov/datadownload/Output.aspx?rel=H15&series=6fa2b8138e0eafe0ad6cde24ba2307f5&lastObs=&from=&to=&filetype=csv&label=include&layout=seriescolumn Hackett, S., & Culbertson, B. (2005). Money Supply (M2). Retrieved April 09, 2012, from South-Western learning website: http://www.swlearning.com/economics/econ_data/money_supply/money_supply_data.html Pundit, C. B. (2009, December 16). The Confusing Connection Between M2 and Inflation. Retrieved April 09, 2012, from Seeking Alpha website: http://seekingalpha.com/article/178402-the-confusing-connection-between-m2-and-inflation Roos, D. (n.d.). How Interest Rates Work . Retrieved April 09, 2012, from How stuff work website: http://money.howstuffworks.com/interest-rate4.htm