France's Recent Economic Activity
Global Business Context Assignment 2008
Part 1:
France’s economic performance over the last 40 years can be illustrated using three main macroeconomic variables; unemployment, inflation and GDP. When comparing them against each other, we can explain the relationships between each variable. (A table of the variables can be found in the appendix.)
This graph shows that although there appears to be no direct relationship between GDP and unemployment until after around 1986, a correlation begins after this point. As we would expect to see, GDP increases as the rate of unemployment falls and vice-versa. Unemployment has been increasing since 1970 and continued until around 1986, eventually peaking with very high rates of nearly 12% in 1994.
When analysing the French GDP, it is evident that although it fluctuates, it does not follow a predictable pattern between 1970 and 1986; all three variables seem to be unstable until around this time. It is worth noting that the economy seems to perform better from the time Jacques Chirac became president in 1995, which may have been due to new economic policies. Also, the substantial dip in GDP and sharp increase in inflation from the early 1970’s was probably attributable to the OPEC oil crisis of 1973 (and 1978) which would have affected both businesses and homes, resulting in less money to spend and less potential for output. (Zaleski, 1992)
This graph reveals French inflation taking on a surprising path, moving in the opposite direction to changes in GDP which we would not normally expect to happen. This, alongside an analysis of the inflation and unemployment graph indicates that France experienced cost-push inflation from 1970 until around 1985.
As the costs of production rose due to the inflation mainly caused by the OPEC oil crisis (an example of import push inflation), unemployment increased as companies could not afford to pay workers and thus reduced their output. The effect of this can be
Part 1:
France’s economic performance over the last 40 years can be illustrated using three main macroeconomic variables; unemployment, inflation and GDP. When comparing them against each other, we can explain the relationships between each variable. (A table of the variables can be found in the appendix.)
This graph shows that although there appears to be no direct relationship between GDP and unemployment until after around 1986, a correlation begins after this point. As we would expect to see, GDP increases as the rate of unemployment falls and vice-versa. Unemployment has been increasing since 1970 and continued until around 1986, eventually peaking with very high rates of nearly 12% in 1994.
When analysing the French GDP, it is evident that although it fluctuates, it does not follow a predictable pattern between 1970 and 1986; all three variables seem to be unstable until around this time. It is worth noting that the economy seems to perform better from the time Jacques Chirac became president in 1995, which may have been due to new economic policies. Also, the substantial dip in GDP and sharp increase in inflation from the early 1970’s was probably attributable to the OPEC oil crisis of 1973 (and 1978) which would have affected both businesses and homes, resulting in less money to spend and less potential for output. (Zaleski, 1992)
This graph reveals French inflation taking on a surprising path, moving in the opposite direction to changes in GDP which we would not normally expect to happen. This, alongside an analysis of the inflation and unemployment graph indicates that France experienced cost-push inflation from 1970 until around 1985.
As the costs of production rose due to the inflation mainly caused by the OPEC oil crisis (an example of import push inflation), unemployment increased as companies could not afford to pay workers and thus reduced their output. The effect of this can be
References: Astier, H. 2007. What now for Nicolas Sarkozy? [online]. [Accessed 5th March 2008] Available from World Wide Web: http://news.bbc.co.uk/1/hi/world/europe/6632711.stm Balmforth, R Dullien, S. 2007. Is Sarkozy’s “fiscal shock” the right thing for France? [online]. [Accessed 5th March 2008] Available from World Wide Web: http://www.euro-area.org/blog/?p=80) Howarth, D Matlack, C. 2007. Sarkozy Vows Reform: How Far Can He Go? [online]. [Accessed 5th March 2008] Available from World Wide Web: http://www.businessweek.com/globalbiz/content/may2007/gb20070507_834900.htm?chan=search Samuel, H Sloman, J. (2005). The Economic Environment of Business. Essex: Prentice Hall Wyplosz, C Zaleski, P. A. (1992). Industry Concentration and the Transmission of Cost-Push Inflation: Evidence from the 1974 OPEC Oil Crises. Journal of Economics. [Accessed 3rd March 2008] Bush and Sarkozy declare Iran aim DIY market worth £8bn. 2007. [online]. [Accessed 5th March 2008] Available from World Wide Web: http://www.diyweek.net/news/news.asp?id=10367 France gripped by massive strike Trade unions across Europe. 2008. [online]. [Accessed 5th March 2008] Available from World Wide Web:http://www.fedee.com/tradeunions.html