Purchasing Power Parity Dissertation

This dissertation examines long-run purchasing power parity (PPP) between the United States and other competing countries and regions using monthly data from 1960 to 2019. Mainstream methods of PPP test and most influential researches are reviewed.

Three methods of PPP testing – Unit Root Test, Cointegration Test, Panel Unit Root Test have been applied in this paper. We identify that PPP holds between the US and a certain number of countries by analysing the test results. Also, the results of PPP test between the US and its top 10 trading partners have been specifically investigated and elaborated.

This dissertation highlights that both the Multivariable co-integration tests and the bivariable Cointegration tests are applied in order to find out the effect of prior restrictions on the results. Then, this chapter examines whether the PPP holds between the US and its top 10 trading partners countries minus China with the panel unit root test. Finally, in the sixth chapter, this paper concludes that PPP holds in 41 countries out of 176 countries, and among the US top 10 trading partners, only China, Canada and India do not have solid evidence supporting PPP.

The purchasing power parity (PPP) theory, as one of the most influential economic theories, has been widely used in macroeconomic analysis. It states that the price of the same commodity or a basket of products in two countries should be proportional to the exchange rate between the two countries. The exchange rate is crucial to the economic development of a country, not only because it affects the volume of imports and exports between countries, but also because it is highly correlated with other economic indicators, such as GDP and interest rate. Therefore, it is necessary to study the PPP theory to determine the equilibrium exchange rate as well as assist governments in adjusting exchange rates based on empirical evidence.

This dissertation will be structured in the following way. In chapter 1, this paper introduces the definition of purchasing power parity and then explains the significance of PPP studying. A brief history of the stages of the PPP study is also covered in this chapter. The second chapter is the literature review. It reviews the origin and evolution of PPP theory and common test methods. Sample testing results using different methods are also discussed in this dissertation and they also give us a broad view of PPP tests conducted for various countries using data from different time spans.

In the meantime, critiques and strengths of each test method are covered to provide a comprehensive view of each PPP test method. Besides, previous studies on the US are reviewed as well. In the third chapter, this paper presents a series of econometric methods and models to be used in this thesis, including unit root test, cointegration test and panel unit root test. In the fourth chapter, it explains the data source in detail. For EU countries that miss data due to the adoption of EUR, this paper also describes how the equivalent data is generated to fill the holes. The fifth chapter is the empirical analysis. This chapter first plots the real exchange rate for the US and its top 10 trading partners, and by presenting the graphs, the trend will be analysed.

In general, the purchasing power parity (PPP) theory works miserably when applied to real-world data. In other words, it is rare for the PPP relationship to hold true between any two countries at any particular point in time. In most scientific disciplines, the failure of a theory to be supported by the data means the theory is refuted and should be thrown out or tossed away.

However, economists have been reluctant to do that with the PPP theory. In part this is because the logic of the theory seems particularly sound. In part it’s because there are so many “frictions” in the real world, such as tariffs, nontariff barriers, transportation costs, measurement problems, and so on that it would actually be surprising for the theory to work when applied directly to the data.

Purchasing Power Parity Dissertation Contents

Chapter 1 – Introduction

Chapter 2 – Literature Review
Two Versions of the PPP Theory
Evolution of PPP Test
Simple Static PPP Test
Unit Root Test
Cointegration Test
Panel Unit Root Test
Non-linear Test
US & Related Tests

Chapter 3 – Empirical Framework
Tests for a Unit Root in the Real Exchange Rate
Cointegration Test
Panel Unit Root Test

Chapter 4 – Data Description

Chapter 5 – Empirical Analysis
Real Exchange Rate Observation
Unit Root Test
Cointegration Test
Multivariate Cointegration Test
Bivariate Cointegration Test
Panel Unit Root Test
Analysis of the US Top 10 trading countries’ Test Result

Chapter 6 – Conclusion

References

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Contactless Payments Economics Dissertation

Contactless Payments Economics Dissertation – Has the Uptake of Innovative Payment Methods affected UK Student Spending Habits? Emphasis on Contactless Payments

This dissertation analyses the current payment landscape in the UK in a period of increased digitisation and use of contactless payment. The aim of this dissertation is to understand how innovative payment instruments like contactless cards and mobile payments, have affected the spending behaviour of students age 18 – 24.

It investigates the rationale for such behaviour and explores the differences that arise when using traditional methods such as cash. Using qualitative semi-structured interviews and questionnaire responses, this study builds on existing research and applies thematic content analysis to identify trends in student spending patterns when exposed to innovative payment methods.

Further illustrated by quantitative regression analysis, the use of contactless payment methods, significantly influenced student spending habits. Common themes apparent from the analysis included a subconscious accumulation of small, impulsive purchases, as well as a reduced sense of guilt when using contactless payments. This was primarily attributed to the theory that in comparison to using cash for payments, contactless transactions are intangible and therefore do not feel like using real or tangible money.

Dissertation Contents

Chapter 1 – Introduction

Chapter 2 – Literature Review
History of contactless payment
Contactless Payment Technology
Mobile Proximity Payment
Adoption of Technology Model
Consumer Payment Choice
The Preference for Innovation
The Transition to a Cashless Society
Student Spending Habits
Psychological Aspects
The Pain of Paying

Chapter 3 – Methodology
Research Design
Research Style – Qualitative
Semi- Structured Interviews
Investigative Questionnaire
Data Analysis
Quantitative Analysis – Probit Regression
Bank Balance
Financial Fluency

Chapter 4 – Data Analysis and Discussion
Description of Sample
Qualitative results and Descriptive Statistics
Initial Observations
Payment Tangibility
The Effect of Contactless Adoption on Spending
Mobile Proximity Payment (MPP Adoption)
Inhibitors to Contactless Adoption
Student Debt Contributors
Implications of a Cashless Society
Quantitative Regressions
Awareness of Current Bank Balance
Financial Fluency
Limitations of the Dissertation

Chapter 5 – Evaluation and Conclusion

References

Appendix

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Globalisation Patterns of Consumption

According to UK Finance (2020). “We all tend to reach for the payment methods that we are accustomed to using, forming habits over time that can be quite strong. Once we have found a set of payment methods that we are comfortable using and that help us to manage our finances effectively, it can take a great deal for us to change to a different way of doing things. As a result, payment markets have historically tended to evolve slowly. Despite this natural inertia, technological change and significant innovation in payment methods have brought greater choice for people and businesses in how they pay for things.

*Contactless Payments Economics Dissertation*

This has been led by the popularity of the smartphone, which has revolutionised many aspects of modern life in just over a decade. Also, innovations such as contactless payments, mobile wallets, online banking and mobile banking have had a significant impact on the way that we now choose to pay for goods and services and manage our finances. As people have realised the value to them of doing things in a different way, so their payment habits have evolved, resulting in a gradual revolution in payments in the UK.

During 2019, card payments continued to grow as consumers and business increasingly used their cards to pay for things, whether online or in the ‘real world’. This growth saw card payments increase to the point of accounting for over half (51%) of all payments in the UK for the first time. Online and contactless payments continued to act as substantial drivers of this growth, with eight out of ten UK adults using contactless payments in 2019.

Strong growth was also seen in Faster Payments as both businesses and consumers increasingly used online and mobile banking to make payments and to transfer money. Mobile banking in particular continues to grow strongly, and users are continually widening the range of tasks that they perform using such services, exploring beyond checking their balances to also make one-off payments and manage other aspects of their finances” Source: UK Finance. UK PAYMENT MARKETS SUMMARY 2020.

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London Housing Market Collapse Dissertation

Predicting Economic Market Failure and Collapse in The London Housing Market and How It Compares to a Collapse in The Wider UK Housing Market – A VAR Approach

The general objective of this dissertation is to (i) test whether a collapse in the London Housing Market would affect the UK economy and (ii) see if its impact on the economy is more significant than the impact of a UK Housing Market shock. We use a Vector Auto-regressive model (VAR) to analyse how GDP, Inflation and Uncertainty might react to a shock in either the London or the UK Housing Market. To do that, we go through the Impulse Response Function (IRF) which helps us identify the sign, significance and duration of the responses of our variables to a simulated shock in one the Housing Market.

We then go through the Historical Decomposition which calculates the contribution of the housing markets to the different structural accumulated shocks of our variables; and, helps us estimate whether the results found through the IRFs make empirical sense. We expect GDP to fall, Inflation to slow down, and Uncertainty to be negatively affected. We also consider the possibility of a recession being created in the economy, if GDP growth is affected negatively for more than three quarters. Lastly, we suppose that the London Housing Market will have a more significant impact on the economy.

**London Housing Market Economics Dissertation**

London Housing Market Dissertation Contents

Chapter 1 – Introduction

Chapter 2 – Literature Review

Chapter 3 – Analysis
Objectives
Methodology and Data
Empirical Model and the Data
Identification Strategy
Results
Impulse Response
The London Case
The UK Case
Historical Decomposition
Comparing the London case with the UK case
Sensitivity Analysis
Robustness Analysis
Changing the order
Replacing Uncertainty with other variables
Dividing the sample
Results prior to 1992
Results following 1992
Comparing our two sub-samples results
Critics and limitations of our model

Chapter 4 – Conclusion

Bibliography

Appendix

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It is the biggest plunge since the 7.0% annual drop recorded in August 2009, says ONS. “House prices in London have fallen at their fastest pace since the financial crash a decade ago as the capital bears the brunt of the nationwide torpor in the property market. Amid a dearth of potential buyers, the cost of a home in London was 4.4% lower in May than a year earlier, according to the latest official snapshot of the market from the Office for National Statistics.

The ONS said it was the biggest drop in London prices since the 7.0% annual fall recorded in August 2009 – a period that included the near-meltdown of the global banking system in the autumn of 2008” (The Guardian, 2019).

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Five Forces Model Automobile Industry

Five Forces Model Automobile Industry Case Study Analysis

Title: Five Forces Model Automobile Industry Case Study Analysis. Michael Porter’s Five Forces Model is a simple yet effective business analysis tool that is used to determine whether a strategy has the potential to be profitable in a company’s competitive environment. When carried out in the right way, with the right tools, the Five Forces Analysis can provide invaluable insight into your business’s competition and how much power you hold in the market, so you can adjust your strategy for success. As its name suggests, there are five forces which include the intensity of rivalry, power of buyers, power of suppliers, threat of substitutes and threat of potential new entrants (Porter. 1981).

Intensity of Competitive Rivalry

The key factors that influence the intensity of rivalry in the automobile industry include the number of competitors, the brand recognition of the competitors and the frequency with which new automobile products are introduced by competitors. According to Potter’s case study the global automobile industry is highly concentrated.

However, none of the companies in the industry has achieved donation of the market. The case study indicates that about seven firms have around 10 to 15 percent of the market share. The reason for this is the high acquisition levels and collaboration activities in the global automobile industry, which minimizes competition regardless the frequency of purchase or recognition of the different brands in the industry.

As a result, the intensity of competitive rivalry in the industry is moderate. The implication of the moderate competitive intensity is that automobile firms still manage to make significant profits especially since the level of competition is suppressed by the joint ventures and alliances among automobile firms in the industry.

Five Forces Model Porter — ***Porter’s Five Forces Model***

Power of Buyers

The factors that shape the power of customers in the automobile industry include the number of buyers in the industry, frequency of purchase, and the size of purchases. According to Potter, the global demand for cars is associated to a nation’s economic performance.

The data on Worldwide Car sales in 2016 indicate that China, which is among the top best performing economies in the world had the largest had a percentage increase of 10.7 in car sales in 2016. This demand can be viewed in the context of the wider process of a country’s economic development which leads to selective ownership that causes mass market volumes of short time cycles that reduce within mass volume causing delays in purchases or consumer changing segments.

This means that buyers demand for automobiles is determined by eternal elements that they cannot control. In this regards, the intensity of the power of buyers is moderately weak, which means, firms are still able to make reasonable profits.

Power of Suppliers

The power of suppliers is influenced by the following factors, the number of suppliers, replaceability of the supplies and the exclusivity of the supplies (Porter, 1980). Potter indicates that suppliers of the global automobile industry have become solution provider and knowledge partners with the automobile firms. Moreover, technology is increasingly becoming more intelligent enabling the suppliers to gain larger economies of scale giving them the power to bargain.

However, in the global automobile industry 33% and 17% of all suppliers have their manufacturing facilities in Eastern Europe and China respectively which raises the issue of Intellectual property rights and theft of technology. These has caused a decline in the power of mot suppliers as this trend is expanding to other parts of the world. For this reasons, the intensity of the power of suppliers is moderately strong, which means that the firms are forced to collaborate and partner with suppliers to minimize most of raw material to maximize profits.

Threat of Substitutes

Threat of substitutes in the automobile industry is determined by technology advancement, affordability and availability of potential substitutes and customer’s acceptance (Porter, 1980). According to the case study, the global automobile industry threat of substitution is mainly due to environment issues and economic consideration, where people see alternatives that are cheaper and greener.

The automobile industry contributes about 70% of the emission of CO2, and consumers are ready to take up alternatives that are more environmentally friendly. However, such substitutes are mostly provided by the same automobile firms. In this case, the intensity of threat of substitutes in the industry is weak making the industry attractive and profitable.

Threat of New Entrants

The threat of new entrants is influenced by the strength of brands of existing competitors, technology and financial requirements and entry barriers (Porter 1980). Potter indicates that there are issues related to the outward and inward direct investment that firms seek to use to expand or grow into new markets affect entry strategies adopted by these companies. However, on a positive note most governments around the world are attracting investors by providing a range of grant aid and subsidised domestic rates, but the capital and cost of production and manufacturing is quite high. For this reason the intensity of treat of new entrant is weak, which makes the industry competitive ad highly profitable.

Five Forces Model Conclusion

From the case study, it is evident that competitive rivalry in the automobile industry is moderately strong, while the buyers bargaining power is moderately weak. It is also evident that the suppliers bargaining power is moderately strong, while the threat of substitutes is weak. The threat of new entrant is weak considering that the firms in the industry have gained strong market positioning that are hard to compete with and the high investment capital needed. Based on this analysis, is evident that the automobile industry is a feasible market especially for the companies that are already operating in the market.

References

Porter, M. E. (1980) Competitive Strategy. New York: Free Press

Potter, N.S. The Global Automotive Industry: The Turbulence Increases

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Stress Management Assignment

Stress Management

Title: Stress Management. Identifying the relationship between stress level and physical activity in humans is one of the most useful strategies. It plays an important in understanding the root cause of the problem and knowing the best approach towards dealing with it or even managing it (Wang, Feifei & Silvia, 2019). Based on my stress inventory chart, my cumulative points stand at 358 points. A critical analysis of some of the issues leading to my high point accumulation reveals the most common stressors that a normal person would undergo and experience in the course of their growth and development.

In life, we are all faced with challenges such as losing our loved ones, financial constraints, first year and final year exams in high school as well as the death of our close friends or arguments with our siblings. These experiences induce the development of stress in us as humans and some of these occurrences or activities we may have little or completely no control over.

Stress Management and Physical Activity

In an adolescent life, for example, different situations can create stress in humans. For example, arguments with siblings or parents, death of our close friends, failure in an examination, or financial difficulty can lead to the creation of a significant amount of stress in adolescent life. The relationship between physical activity and stress is therefore evident. In most cases, an increase in physical activity reduces the stress level in humans (Chisholm, Leah, 2016).

When physical activity increase, there is increased production of endorphins which improve human’s ability to sleep and therefore leading to the reduction of stress levels. Therefore, the stress level can be managed by the implementation of physical activities into stressful daily routines. Some of the specific activities that seem interesting and worth finding time include running or going for a walk, playing at the park, doing some household chores, and taking the stairs instead of using the elevator. These are simple physical activities that do not leave a person overworked but burns a high number of calories and increase blood supply to the brain leading to the reduction of stress levels in human.

Having well-defined stress management techniques is a better approach to dealing with stress. There are many strategies that an individual can adopt in dealing with stress other than physical activities (Andersson, 2016). Some of these strategies include keeping a positive attitude in life, accepting the reality of some of the stressful events and experiences that we face as humans and acknowledging that we cannot control some of them, eating a healthy and well-maintained balanced diet, learning and practicing different techniques for relaxing our mind and body lie yoga and meditation as well as learning to be assertive in life instead of being too much aggressive (Mason, 2017). These are important strategies which when practiced effectively and efficiently, will lead to the reduction of stress level when we are faced with some of the stressful events or circumstances in our life.

Works Cited

Andersson, Siv GE. “Stress management strategies in single bacterial cells.” Proceedings of the National Academy of Sciences 113.15 (2016): 3921-3923.

Chisholm, Leah, et al. “Physical Activity and Stress Incontinence in Women.” Current bladder dysfunction reports 14.3 (2019): 174-179.

Mason, Henry D. “Stress-management strategies among first-year students at a South African University: A qualitative study.” Journal of Student Affairs in Africa 5.2 (2017): 131-149.

Wang, Feifei, and Silvia Boros. “The relationship between physical activity, stress, life satisfaction, and sleep quality.” Journal of Physical Education and Sport 19 (2019): 227-234.

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