LOVELY PROFESSIONAL UNIVERSITY

LSM (193)

Capstone Project on

Topic- Comparison of emerging economy through

Macro Economic Indicators

Submitted to -: Submitted by-:

Mr. Vishal Chopra Group: S-025

Mohit Khanna (RS1904B50)

Ravish Sharma (RS1904B51)

R. Swadeep Chhetri (RS1904B52)

Introduction:

What is Emerging Economy?

Rapidly growing and volatile economies of certain Asian and Latin American countries.

They promise huge potential for growth but also pose significant political, monetary, and social risks.

Emerging Economies are those regions of the world that are experiencing rapid informationalization

under conditions of limited or partial industrialization. This framework allows us to explain how the non-

industrialized nations of the world are achieving unprecedented economic growth using new energy,

telecommunications and information technologies.

An emerging market economy (EME) is defined as an economy with low to middle per capita income.

Such countries constitute approximately 80% of the global population, and represent about 20% of the

world's economies. The term was coined in 1981 by Antoine W. Van Agtmael of the International

Finance Corporation of the World Bank. Although the term "emerging market" is loosely defined,

countries that fall into this category, varying from very big to very small, are usually considered

emerging because of their developments and reforms. Hence, even though China is deemed one of the

world's economic powerhouses, it is lumped into the category alongside much smaller economies with a

great deal less resources, like Tunisia. Both China and Tunisia belong to this category because both have

embarked on economic development and reform programs, and have begun to open up their markets and

"emerge" onto the global scene. EMEs are considered to be fast-growing economies. 

What an Emerging Market Economy (EME) Looks Like?

EMEs are characterized as transitional, meaning they are in the process of moving from a closed

economy to an open market economy while building accountability within the system. Examples include

the former Soviet Union and Eastern bloc countries. As an emerging market, a country is embarking on

an economic reform program that will lead it to stronger and more responsible economic performance

levels, as well as transparency and efficiency in the capital market. An EME will also reform its

exchange rate system because a stable local currency builds confidence in an economy, especially when

foreigners are considering investing. Exchange rate reforms also reduce the desire for local investors to

send their capital abroad (capital flight). Besides implementing reforms, an EME is also most likely

receiving aid and guidance from large donor countries and/or world organizations such as the World

Bank and International Monetary Fund.  One key characteristic of the EME is an increase in both local

and foreign investment (portfolio and direct). A growth in investment in a country often indicates that the

country has been able to build confidence in the local economy. Moreover, foreign investment is a signal

that the world has begun to take notice of the emerging market, and when international capital flows are

directed toward an EME, the injection of foreign currency into the local economy adds volume to the

country's stock market and long-term investment to the infrastructure. 

For foreign investors or developed-economy businesses, an EME provides an outlet for expansion by

serving, for example, as a new place for a new factory or for new sources of revenue. For the recipient

country, employment levels rise, labor and managerial skills become more refined, and a sharing and

transfer of technology occurs. In the long-run, the EME's overall production levels should rise, increasing

its gross domestic product and eventually lessening the gap between the emerged and emerging worlds. 

Types of Economic Indicators:

There are three types of economic indicators: Leading, Lagging and Coincident.

Leading :

Leading indicators help to predict what the economy will do in the future. Leading indicators are often

the most useful for an investor. An example of a leading indicator would be hours worked per

employee. If the hours are rising, firms should increase hiring some point in the future.

Lagging

Lagging indicators confirm what leading indicators predict. Lagging numbers change a few months

after the economy does. For example, the unemployment rate is a lagging indicator. Generally, the

unemployment rate will fall after a few months of economic growth. If the leading indicator of hours

worked is increasing, after a few months the lagging indicator of unemployment should fall.

Coincident

Coincident indicators mirror what the data is saying. Coincident indicators are generally what is

happening right now, for example, the jobs report. If a leading indicator is predicting future job gains,

a lagging indicator is saying unemployment is falling, a coincident indicator will tell you the current

employment number.

Macro Economic Indicators to be studied:

Following were the Macro Economic indicators which we have taken for our study they are:-

GDP

Market value of final goods & services produced often denoted by GDP & when NIT (Net

Indirect Tax) is deducted from GDP it becomes the factor cost GDP.

GDP = Consumption + Investment + Govt Spreading + Net Import

Real GDP:

It is the nation’s total output of goods & services adjusted in public change

(Inflation is the major difference between Real GDP & Nominal GDP).

Growth Rate:

The growth rate is the %age increase or decrease in GDP from previous measurement cycle.

Rise in import will negatively affect GDP growth.

If GDP increases it will grow the business of a firm, increase the income & the jobs

vacancies.

Ideal GDP growth Rate:

Most economists have agreed that the ideal GDP growth rate is in the range of 2-3 %. The rate

should neither be fast enough to cause inflation nor too slow to cause recession.

Components of GDP:

Consumption: Durable & Non-durable Goods, Services, etc.

Investment: Business & Residential Construction.

Govt. Spending : Net Exports

Methods:

Expenditure Method – Final spending on goods & services.

Product Approach – Calculate the market value of goods & services produced.

Income Approach – Sum of all the incomes received by the producer in the economy.

Relationship b/w GDP & Inflation

In long run there is no relationship b/w Real GDP & Inflation. But in short run there exists a

relationship. Firms are expecting that the prices are higher than normal. So they go out & hire

male workers in the real GDP.

Unemployment & GDP have an inverse relationship b/w themselves.

Inflation has a great effect on time value of money which is the heart of intrest rate.

Inflation

It means process of rising prices; it is a situation when price if a supply or money is rising. There

are 3 types of inflation:

Creeping Inflation [b/w 5-7]

Running Inflation [b/w 8-15]

Galloping Inflation [15 & above]

Causes of Inflation

Increase in money supply

Deficit Financing

Increase in population

Increase in minimum support price of food products.

Increase in wages

Indirect Taxes

Devaluation of Rupee

Black money

Expectations of future rise in price

Effects of Inflation

Effect on economic development

Effect on foreign investment

Increase in cost

Adverse BOP

Methods of Inflation

CPI

PPI/WPI

GDP Deflation

CPI

The CPI is the measure of the avg. change overtime in the prices paid by a consumer for a

market prospect of consumer goods & services.

Measuring of changes in the purchasing power & the rate of inflation. CPI expresses the current

price of a ‘basket’ of goods & services in terms of prices during the same period in a previous

year to show effects of inflation on the purchasing power. Also called Cost of Living Index. It is

a best known lagging indicator.

Lagging Indicator:

Economic & financial Market indicator, which tend to change only after an economy has already

changed or is following a particular pattern.

Classification of CPI

CPI UNME (Urban Non Manual Employee)

CPI AL (Agricultural Labour)

CPI RL (Rural Labour)

CPI IL (Industrial Labour)

Interest Rate

It is the yearly price charged by a lender to a borrower in order to obtain loan. This is usually

expressed as a %age of the total amount of loan.

Factors Effecting Interest Rate:

• Expected levels of inflation

• General economic conditions

• Monetary policy and the stance of the central bank

• Foreign exchange market activity

• Foreign investor demand for debt securities

• Levels of sovereign debt outstanding

• Financial and political stability

Objective of the Study:

Following were some objective of the study they can be:-

To find out the potential present in the country economy where the companies can invest.

To compare all the possible Macro economic factors of different countries.

Research Methodology:

Type of Research : Descriptive, Analytical Research

Source of Data Collection: Secondary Data through Journals, Websites, Research Papers.

Scope of the Study:

The main point we have consider while selecting this project was related to study the different indicators

of Macro Economics of 10 countries to find out the potential in the countries where in the companies can

invest or can even start their operations.

Literature Review:

Strategy Research in Emerging Economies: Challenging the Conventional Wisdom

Mike Wright Igor Filatotchev, Robert E. Hoskisson, Mike W. Peng (14 JAN 2005)

introduction to the Special Issue on ‘Strategy Research in Emerging Economies’ considers the nature of

theoretical contributions thus far on strategy in emerging economies. We classify the research through

four strategic options: (1) firms from developed economies entering emerging economies; (2) domestic

firms competing within emerging economies; (3) firms from emerging economies entering other

emerging economies; and (4) firms from emerging economies entering developed economies. Among the

four perspectives examined (institutional theory, transaction cost theory, resource-based theory, and

agency theory), the most dominant seems to be institutional theory. Most existing studies that make a

contribution blend institutional theory with one of the other three perspectives, including seven out of the

eight papers included in this Special Issue. We suggest a future research agenda based around the four

strategies and four theoretical perspectives. Given the relative emphasis of research so far on the first and

second strategic options, we believe that there is growing scope for research that addresses the third and

fourth.

Understanding Business Group Performance in an Emerging Economy: Daphne Yiu, Garry

D. Bruton, Yuan Lu (JAN 2005)

The prevalent organizational form in most emerging markets is business groups. These groups have

typically been viewed through a transaction cost economics perspective where they are perceived as

responses to inefficiencies in the market. However, the evidence to date on what generates a positive

business group-performance relationship in such environments is not well understood. This study

expands the understanding of business groups by employing the resource-based and institutional

theoretical perspectives to examine how groups acquire resources and capabilities to prosper. The

empirical evidence is based on over 224 business groups in the emerging economy context of China

and shows that most of the endowed government resources do not help business groups to create a

competitive edge. Instead, those business groups with strategic actions to develop a unique portfolio of

market-oriented resources and capabilities are most likely to prosper. The results provide critical

insights on the relationship between the initiation of institutional transformation and the desired

outcome to be realized by organizational transformation, thus enriching our understanding of

institutions and strategic choices facilitated or constrained by organizational resources in emerging

economies.

Miller and Zhang (1999), through moral hazard elements and game theory applications, the

speculative attack timing occurred in the East Asian crisis can be explained under three views. First,

the non-existence of creditor co-ordination could imply a stop in rolling over loans (Radelet and

Sachs (1998)). Second, unsustainable indebtedness carried out by domestic agents, with assumed

guarantees from government, together with highly reversible capital flows, could be halted (Dooley

(1997) and Krugman (1998)). Third, a speculative attack could be led by large enough market agents

given probable profits come from succeeding, even facing sounds macroeconomic fundamentals in

the emerging economy.

Organizational slack and firm performance during economic transitions: two studies from

an emerging economy

Justin Tan, Mike W. Peng (4 NOV 2003)

How does organizational slack affect firm performance? Organization theory posits that slack,

despite its costs, has a positive impact on firm performance. In contrast, agency theory suggests

that slack breed’s inefficiency and inhibits performance. The empirical evidence, largely from

developed economies, has been inconclusive. Moreover, little effort has been made to empirically

test whether such an impact (positive or negative) is linear or curvilinear. This article joins the

debate by extending empirical work to the largely unexplored context of economic transitions.

Specifically, two studies, based on survey and archival data (N = 57 and 1532 firms, respectively),

are undertaken in China's emerging economy. Our results suggest (1) that organization theory

generates stronger predictions when dealing with unabsorbed slack, and (2) that agency theory

yields stronger validity when focusing on absorbed slack. Furthermore, we also find that the

impact of slack on performance is curvilinear, which resembles inverse U-shaped curves. Overall,

our findings call for a contingency perspective to specify the nature of slack when discussing its

impact on firm performance.

Fred Hu (2004) also finds a negative effect associated with using fixed exchange rate regimes on

economic growth. His study focused on China in particular, and the need for this country to liberalize

their currency and capital control. He concludes that China must go through a gradual process that will

ultimately lead them to a more liberalized system overall. First, they must remove the peg causing them

to have a free floating exchange rate. This would cause them to enter a more balanced trading field

among their major trading partners. Second, they need to introduce a sound banking reform program,

which would stabilize their domestic financial system. Lastly, China should relax their capital control

policies. This would assist them in avoiding financial crisis while simultaneously allow them to gain

more capital freedom

Balazs Egert and Amalia Morales-Zumaquero (2005) analyze the impact of exchange rate volatility

and changes in the exchange rate regimes on export volume for ten Central and Eastern European

transition economies. The first group of countries started their transition with pegged regimes and then

moved towards flexibility. The second group of countries experienced no major changes in their

exchange rate regimes in the past ten years. Their results indicate that an increase in the exchange rate

volatility decreases exports, and this impact has a delay rather than being instantaneous

Guillermo A. Calvo and Frederic S. Mishkin (2003) take on a different view of exchange rate regimes.

They argue that macroeconomic success in emerging market countries can be produced primarily through

good fiscal, financial, and monetary institutions, and they believe that less emphasis should be placed on

the flexibility of an exchange rate regime. They find that when choosing an exchange rate regime, not all

countries are able to conform to one type. This is due to each countries particular needs and their

economy, institutions, and political culture.

Zdenek Drabek and Josef Brada (1998) argue that the flexible exchange rate regime is applicable and

appropriate for six countries with transition economies. Within each of these economies, inappropriate

exchange rate policies have led to an increase in protectionism by these governments. Because of these

policies, the nominal exchange rate is not an indicator of comparative advantage; rather the true indicator

is the level of the real effective exchange rate. Drabek and Brada conclude that these transition

economies will have to eventually switch to a more flexible exchange rate in order to send more accurate

signals to both foreign and domestic investors about the comparative advantages of their country.

International Political Science Review (BBVA):-

This article focuses on the interactions between politics and financial markets in emerging economies.

More precisely, it examines how Wall Street reacts to major Latin American political events. The case

study focuses on the 2002 Brazilian presidential elections. The first section of the article provides a

critical review of the available literature. The second section presents an empirical study of Wall Street

analysts' perceptions of the 2002 presidential elections in Brazil, based on reports produced by leading

Wall Street investment firms. The final section uses polling and financial data from previous Brazilian

elections to place the events of 2002 in comparative historical perspective.

Financial Sector FDI to Emerging Economies Daniel Navia:-

This paper reviews the theoretical literature explaining financial FDI, as well as the empirical results on

the determinants of financial FDI and its potential effects for the home country. From this revision, we

conclude that, at the present stage, the existing theoretical paradigms need to be adapted to explain the

recent surge in international banks' local operations in emerging countries financial sectors.

Macroeconomic and risk diversification theories would seem particularly well-suited to explain this

reality. The empirical literature on financial FDI has concentrated on bank-specific factors and much less

so on macroeconomic determinants, particularly push factors where generally only general

FDI literature is available. The survey draws on this literature in those cases where no specific results for

financial FDI exist. Finally, the effects of financial FDI on the home country are virtually unknown.

The literature on general FDI has focused on employment, trade and investment effects, yet the

consequences on the profitability and systemic risk of home's financial system remain a topic for debate.

Mahasarakham University (1999):-

In light of recent currency and Mahasarakham University financial crises, this

paper reviews the literature on exchange rate regimes and evaluates the fixed and flexible exchange rate

regimes with the focus on the possible choices of the exchange rate regime

for emerging market countries. Given the recent trend of World's financial integration, as a result of the

globalization, has pushed most countries towards the full financial integration, the analysis touches upon

the topics of roles of monetary policy, fiscal policy, currency crises, inflation, credibility, employment,

and income under different exchange rate regimes. Overall, the results indicate that the complexity of the

economic system and the dynamics of the economic development in emerging market countries have

proven the difficulty of sticking to one exchange rate regime for a long period of time. Consequently,

an emerging market country should consider a change of the exchange rate regime upon changes in the

priority of its economic objectives.

European Center for Advanced Research in Economics and Statistics (ECARES) October 2004:-

Estache reviews the recent economic research on emerging issues for infrastructure policies affecting

poor people in developing countries. His main purpose is to identify some of the challenges the

international community, and donors in particular, are likely to have to address over the next few years.

He addresses six main issues: (1) the necessity of infrastructure in achieving the Millennium

Development Goals; (2) the various dimensions of financing challenges for infrastructure; (3) the debate

on the relative importance of urban and rural infrastructure needs; (4) the debate on the effectiveness of

infrastructure decentralization; (5) what works and what does not when trying to target the needs of the

poor, with an emphasis on affordability and regulation challenges; and (6) the importance of governance

and corruption in the sector. The author concludes by showing how the challenges identified define a

relatively well integrated agenda for both researchers and the international infrastructure community

Centre for Economic Policy Research (CEPR) July 2007:-

This paper reviews the literature on the finance-growth nexus within a neoclassical growth framework,

placing an emphasis on the policy implications in the current European environment that has placed

financial reforms high on the policy Agenda. While more research is needed to establish causality and

verify the theoretical channels linking access to finance and growth, firm-level, industry-level, macro,

and country-specific studies all tend to show a significant correlation between financial efficiency and

economic performance. The empirical evidence hint that in underdeveloped

and emerging countries financial development fosters aggregate growth mainly by lowering the cost of

capital, while in advanced economies by raising total-factor-productivity

John Whalley  December 2003:-

This paper discusses the potential impacts of services trade liberalization on

developing countries and reviews existing quantitative studies. Its purpose is to distill themes from

current literature rather than to advocate specific policy changes. The picture emerging is one of

valiant attempts to quantify in the presence of formidable analytical and data problems yielding only a

clouded image of likely impacts on trade, consumption, production, and welfare.

Adewale Adeoye September 2007:-

Many experts believe that Foreign Direct Investment (FDI) can provide substantial benefits

to emerging market countries and help to speed up the economic development process. National accounts

data also shows FDI to be the single largest component of capital inflows to the vast majority

of emerging market countries. Thus, it is crucial to determine the drivers and determinants of inwards

FDI flows to such markets. There have been several studies on some FDI determinants such as market

size and human capital factors; however the role of corporate governance at a national level has been

largely neglected. This has mainly been due to the lack of good quality data on corporate governance

measures and indicators. The creation of the World Bank Governance Indicators by Kaufmann et al

(1999) makes rigorous studies of corporate governance and FDI possible. This study uses the World

Bank Governance Indicators to empirically test the relationship between macroeconomic level corporate

governance and inwards FDI flows into emerging market countries, using a panel data set of

33 countries between 1997 and 2002. The key finding is that macroeconomic corporate governance has a

positive and significant effect on inwards FDI flows, suggesting host country governments and

authorities should shape policy in this area to maximize inwards FDI flows.

Krishna Chaitanya V. (February 2008):-

The paper investigates whether the decline in environmental quality in BRIC economies is due to high

energy consumption level which is a resultant of rapid economic growth. We answer these using

environmental, macroeconomic and financial variables along with Kyoto Protocol indicators based on

panel data from 1992 to 2004. The long run equilibrium relationship between energy consumption and

economic growth was examined. Through the panel data, feasible general least squares (FGLS)

procedure was employed to estimate the environmental degradation caused by the increase in energy

consumption. Pooled regression analysis is used to estimate the relationship between energy consumption

and growth variables. We study the impact of excessive economic growth rates on energy consumption

levels by means of threshold pooled ordinary least squares (POLS) method. Moreover, our analysis also

attempts to fulfill the econometric criticism of the Environmental Kuznets Curve faced.

Sectors which can find the potential in other country other than India:-

Banking Sector:-

Financial sector reforms were initiated as part of overall economic reforms in the country and wide

ranging reforms covering industry, trade, taxation, external sector, banking and financial markets have

been carried out since mid-1991. A decade of economic and financial sector reforms has strengthened

the fundamentals of the Indian economy and transformed the operating environment for banks and

financial institutions in the country. The sustained and gradual pace of reforms has helped avoid any

crisis and has actually fuelled growth. As pointed out in the RBI Annual Report 2001-02, GDP growth

in the 10 years after reforms i.e. 1992-93 to 2001-02 averaged 6.0% against 5.8% recorded during

1980-81 to 1989-90 in the pre-reform period. The most significant achievement of the financial sector

reforms has been the marked improvement in the financial health of commercial banks in terms of

capital adequacy, Profitability and asset quality as also greater attention to risk management. Further,

deregulation has opened up new opportunities for banks to increase revenues by diversifying into

investment banking, insurance, credit cards, depository services, mortgage financing, securitisation,

etc. At the same time, liberalisation has brought greater competition among banks, both domestic and

foreign, as well as competition from mutual funds, NBFCs, post office, etc. Post-WTO, competition

will only get intensified, as large global players emerge on the scene. Increasing competition is

squeezing profitability and forcing banks to work efficiently on shrinking spreads. Positive fallout of

competition is the greater choice available to consumers, and the increased level of sophistication and

technology in banks. As banks benchmark themselves against global standards, there has been a

marked increase in disclosures and transparency in bank balance sheets as also greater focus on

corporate governance.

Indian Information Technology Sector:-

The Indian Information Technology sector can be classified into the following broad categories - IT

Services, Engineering Services, ITES-BPO Services and E Business. IT Services can further be

categorized into Information Services (IS) outsourcing, packaged software support and installation,

systems integration, processing services, hardware support and installation and IT training and

education. Engineering Services include Industrial Design, Mechanical Design, Electronic System

Design (including Chip/Board and Embedded Software Design), Design Validation Testing,

Industrialization and Prototyping. IT Enabled Services are services that use telecom networks or the

Internet. For example, Remote Maintenance, Back Office Operations, Data Processing, Call Centers,

Business Process Outsourcing, etc. IT sector is attracting considerable interest not only as a vast

market but also as potential production base by international companies. Therefore India is considered

as a pioneer in software development and a favorite destination for IT-enabled services.

The rapid growth in the sector is a consequence of access to trained English-speaking professionals,

cost competitiveness and quality telecommunications infrastructure. Companies operating from India

are able to leverage the advantage of the Indian time zone to offer 24 x 7 services to their global

customers. Several world leaders including General Electric, British Airways, American Express, and

Citibank, have outsourced call centre operations to India.E Business (electronic business) is carrying

out business on the Internet; it includes buying and selling, serving customers and collaborating with

business partners. The following are some of the strengths of the Indian IT sector:

· Highly skilled human resource

· Low wage structure;

· Quality of work;

· Initiatives taken by the Government (setting up Hi-Tech Parks and implementation of e-governance

projects);

· Many global players have set-up operations in India like Microsoft, Oracle, Adobe, etc.;

Following Quality Standards such as ISO 9000, SEI CMM etc.

· English-speaking professionals;

· Cost competitiveness;

· Quality telecommunications infrastructure.

The following are some of the weaknesses of the sector:

· Absence of practical knowledge;

· Dearth of suitable candidates;

· Less Research and Development;

· Contribution of IT sector to India’s GDP is still rather small;

· IT development concentrated in a few cities only.

Real E- State Sector:-

India is the world’s largest democracy in terms of population, with India’s Central Statistical

Organization (CSO) estimating a population of 110 crore people as at March 31, 2005. According to

the World Bank, India was the 10th largest economy in the world in the year ended December 31,

2005, with a GDP in nominal terms estimated to be US$ 750 billion. This improved economic

condition augurs well for Real Estate Sector in India. The term ‘real estate’ covers residential

housing, commercial offices and trading spaces such as theatres, hotels and restaurants, retail outlets,

industrial buildings such as factories and government buildings. Real estate involves the purchase,

sale and development of land, residential and non-residential buildings. The activities of the real

estate sector encompass the housing and construction sector also. Real estate is a major employment

driver, being the second largest employer, next only to agriculture. This is because of the chain of

backward and forward linkages that the sector has with other sectors of the economy. About 250

ancillary industries such as cement, steel, brick, timber, building material etc. are dependent on the

real estate industry. A unit increase in expenditure in this sector has a multiplier effect and the

capacity to generate income as high as five times. Contribution of housing and real estate to India’s

GDP is meager 1% against 3-6% of developing countries. If the economy grows at the rate of 10%,

the housing sector has the capacity to grow at 14% and generate 3.2 million new jobs over the

next 10 years.

The Indian real estate sector can be bifurcated into the organized and unorganized segments, with the

unorganized segment accounting for over 70% of the housing units constructed. The organized

segment comprises private real estate developers and government or government affiliated entities.

The industry is highly fragmented with most of the real estate developers having a city-specific or

region specific presence.

Data Analysis & Interpretation:-

India:-

Year 2006 2007 2008 2009 2010Inflation 4.2 5.3 6.4 8.3 10.9

Year 2006 2007 2008 2009 2010GDP 8.4 9.2 9 7.4 7.4

8.4

9.2

9

7.4

7.4

GDP 12345

Year 2006 2007 2008 2009 2010

unemployment 8.9 7.8 7.2 6.8 10.7

8.9

7.8

7.26.8

10.7

unemployment 12345

Year 2006 2007 2008 2009 2010Interest rate

5.5 6 6 4 3.38

5.5

66

4

3.38

Interest rate

12345

Year 2006 2007 2008 2009 2010CPI 4.2 4.2 5.3 6.4 8.3

4.2

4.2

5.36.4

8.3

CPI 12345

USA:-

Particulars 2006 2007 2008 2009 2010GDP 3 2.2 2.1 1 1.5

5

4.24.5

2.31.2

12345

Particulars 2006 2007 2008 2009 2010Interest Rate 5.2 3.1 0.63 0.25 0.8

5.23.1

0.630000000000001

0.25 0.8

Interest Rate 12345

Year 2006 2007 2008 2009 2010Unemployment rate 4.5 5.6 6.2 9.6 9.8

Year 2006 2007 2008 2009 2010

CPI 2.5 3.2 2.5 2.9 3.8

Japan:-

Year 2006 2007 2008 2009 2010Unemployment rate 4.4 4 3.8 4.5 5

4.4

4

3.84.5

5

Unemployment rate 12345

Particulars 2006 2007 2008 2009 2010GDP 2 2.5 1.9 -8 4

Particulars 2006 2007 2008 2009 2010Interest Rate 0.1 0.2 0.8 0.1 0

Particulars 2006 2007 2008 2009 2010Inflation Rate 0.1 0.2 0.4 0.2 0.2

0.1

0.2

0.4

0.2

0.2

Inflation Rate

12345

Year 2006 2007 2008 2009 2010CPI 0.1 0.3 0.3 0.1 1.4

UK:

Particulars 2006 2007 2008 2009 2010Inflation Rate 1.6 1.9 2.1 0.8 3.3

Particulars 2006 2007 2008 2009 2010GDP 3.5 3 2.2 2.8 1.6

Particulars 2006 2007 2008 2009 2010Interest Rate 4.2 5.5 5.8 0.2 0.5

Particulars 2006 2007 2008 2009 2010

Umemployment rate 5 4.7 5.3 6.4 7.7

Year 2006 2007 2008 2009 2010CPI 1.4 2.1 3 2.3 3.6

China:-

YEAR 2006 2007 2008 2009 2010

UNEMPLOYMENT 11.3 10.2 11.1 6.4 12

YEAR 2006 2007 2008 2009 2010

INFLATION 2 2.3 6.2 -1 4.2

YEAR 2006 2007 2008 2009 2010INTEREST 5.8 6.3 7.5 5.4 5.6

YEAR 2006 2007 2008 2009 2010UNEMPLOYMENT 4.2 4 4 4.2 4.34

4.2

4

4

4.2

4.34

UNEMPLOYMENT

12345

Year 2006 2007 2008 2009 2010CPI 4.1 1.8 1.5 4.8 5.9

Russia:-

YEAR 2006 2007 `2008 2009 2010

UNEMPLOYMENT 7.8 7.2 7 9.2 6.8

YEAR 2006 2007 2008 2009 2010

INFLATION 11 9.3 12.1 13 8

Year 2006 2007 2008 2009 2010GDP 6.4 6.7 8.1 5.6 -7.9

YEAR 2006 2007 2008 2009 2010INTEREST 12 11.3 10.1 13.2 8

Year 2006 2007 2008 2009 2010CPI 11.5 12.7 9.8 9 14.1

Interpretation:-

After analyzing the major factors of Macro economics of various country economy we came to

known that:-

In case of India :-

The main factors to be considered in case of India are as follows:-

1. Inflation: the inflation of the country is increasing year by year which shows that value

of the money is being depreciated year by year so the potential for the Banking sector is

available and there is an ample amount of scope for the growth of the same.

2. GDP: due to the increase in the Inflation of the country GDP of the country decrease to

7.4 by 9 which shows that the market value of the product and services provided is

demanded less in quantity.

3. Unemployment: As the result of the above two the unemployment rate is also increasing

as company fails to expand their business and recruit new employees in the organization.

In Case of USA :-

1. Inflation: The inflation rate is increasing day by day but the increment is very less as

it is the most powerful economy the increased costs can be easily absorbed as Per

Capita income of the country is much more comparing to the other countries.

2. Unemployment: As there is less scope for the business to grow in an economy of

USA the unemployment rate goes up but there is various type of scheme by the govt.

to pay off some fixed amount of money to those people for their livelihood.

3. GDP : All the companies are at their peak stage but not able to search for new scope

to grow their business as a result of which the GDP is declining

It is suggested that it is not suitable for any company to sustain in the US market on their own

but can fruitfully conduct their business by having a Joint Venture with any of the US Company.

In case of China :-

Following were some findings after analyzing the Macro Economic indicators of China.

1. Unemployment: - The main cause of the raise in the increase in the unemployment in

China is due to the Currency manipulation by the china government comparing to the

USA as a result of which USA has reduced the currency value of China due to which

the value of currency of China reduces resulting in the increase in the Unemployment

in China.

2. GDP: - As the result of the above the prices of the raw material also increases which

result in reducing the overall GDP of the country in the year 2010.

3. Inflation: - As the result of the above two the inflation of the country increase from -

1 to 4.2 % as raw material is costly resulting in the increase in the cost of the finish

goods also.

Refrences :

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Calvo, Guillermo A. and Mishkin, Frederic S., “The Mirage of Exchange Rate Regimes for Emerging Market Countries” NBER Working Papers (June 2003).

Drabek, Zdenek and Brada, Josef, “Exchange Rate Regimes and the Stability of Trade Policy in Transition Economies” WTO Economic Research and Analysis Division Working Paper (July 1998).

Egert, Balazs and Morales-Zumaquero, Amalia, “Exchange Rate Regimes, Foreign Exchange Volatility and Export Performance in Central and Eastern Europe: Just Another Blur Project?” 8 Bofit Discussion Papers (2005).

Fountas, Stilianos and Aristotelous, Kyriaco, "Does the Exchange Rate Regime Affect Export Volumes? Evidence from Bilateral Exports in the US-UK Trade: 1900-1998," Department of Economics 43, National University of Ireland, Galway (2003).

Hu, Fred, “Capital Flows, Overheating, and the Nominal Exchange Rate Regime in China,” Cato Institute Conference April 8-9 (2004).

Levy-Yeyati, Eduardo and Sturzenegger, Federico, “Classifying Exchange Rate Regimes: Deeds vs. Words,” European Economic Review, Vol. 49, Issue 6: Pages 1603-1635 (2005).

Nabli, Mustapha Kamel and Véganzonès-Varoudakis, Marie-Ange, “Exchange Rate Regime and Competitiveness of Manufactured Exports: The Case of MENA Countries” World Bank (2002).

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