Computer-room Seminar
Methods for Applied Economics
Exercise 1
(30th January, 2020)
Computer room: Aula 3, Aulario.
th February as the latest)
Exercise 1.1
Stages of growth of the Spanish economy in the period
1960-2016
Many techniques are available to identify the phases or stages of the economic growth of a
country. This exercise illustrates one of these techniques and applies it to the data of the Spanish
economy in the period 1960-2016.
The procedure is based on estimating the long run trend of the GDP per capita (GDPpc) during
the whole period between 1960 and 2014. It allows us to establish growth stages through the
comparison between the observed GDPpc and its long run trend. A logarithm of the GDPpc
must be calculated and the slope of the different periods needs to be compared with the slope
of the line depicting the long run trend of growth. This comparison identifies periods in which
the GDPpc grows at the same rate as the trend, as well as, periods where growth is below or
above the trend. This technique is very useful to recognize the fluctuations that occur in the
growth of an economy. It is simple and is based on the estimation of an equation that captures
the long run trend of growth by using Ordinary Least Squares (OLS). OLS is a common
technique in econometrics which is available in Microsoft Office Excel package.
The data to be used will be downloaded from the Bank of Spain. It is a very interesting long
series, which would not be available in other sources such as the Spanish National Institute of
Statistics (the INE). As we will see in the future, the INE offers shorter series which makes long
run growth comparisons more difficult. The Bank of Spain, through its research division, takes
the data and makes the changes necessary so as to obtain a long comparable series. Now let us
go to the Bank of Spain web site:
http://www.bde.es/
Statistics
General Economic Indicators
Summary Indicators
Structural indicators of the Spanish economy and EU
Time series table 1.4
The first activity to be performed is to download the file into an excel spreadsheet. You must
download it so that information can be seen properly in the file. The file contains 189 variables
on many aspects of the Spanish economy during the period 1960-2014.
The variable to be used in this exercise 1 is:
SI_1_4.2: GDPpc constant 2005 (PPP, in EUR thousands)
Open the file as an Excel file and proceed as follows:
– Transform the variable SI_1_4.2 series taking logarithms: Ln (GDPpc).
– Generate a variable that will be called trend t, taking the values 1, 2, 3, 4, 5…, 57
– Calculate the trend GDPpc by estimating (using OLS) the following equation:
Ln (GDP pc) = a + b t,
where a is a constant, b is the slope and t is the trend variable defined above. We are going to
use the Excel routine: “regression”, which is available in the package of “data analysis”, which
has to be previously installed if it is not already available under the tab “data” in Excel. If you
need to install the “data analysis” package put that name in the Excel help and follow the steps
requires. The installation procedure varies according to your Excel version.
– Now that you know the slope and point where the line crosses the Y axis, generate by yourself
the trend GDPpc using the coefficients a and b estimated in the previous regression.
With the series you have just generated:
1. Draw a graph to represent the series of the observed GDPpc (i.e., Ln(GDPpc)) and its long
run trend.
2. Write a short text (around 300-400 words) explaining which are the main phases of growth
in the Spanish economy (1960-2016). These phases have to be identified by comparing the
(average) slope of each period with the slope of the long run trend.
You have to hand in the Graph and the short text identifying the phases of growth of the Spanish
economy.
Exercise 1.2
Quarterly GDP in the Quarterly National Accounts. National
Institute of Statistics (INE).
In this exercise we turn to the analysis of the short run. We will study the short run fluctuations
of the Spanish economy using quarterly data from the INE.
information.
The data are obtained from the following web: (where an English version can be selected)
http://www.ine.es/
inebase
Economy
National accounts
Quarterly Spanish National Accounts
Results
Detailed results series/GDP and its components
GDP mp Supply (chain-linked volume indices)
In this web several dimensions of the data need to be selected.
 “Data type”: “Seasonal and calendar effects adjusted data”
 “Macroeconomic aggregates”: “Gross Domestic Product at market prices (GDPmp)”
 “Levels and Rates”: Levels
 “Period”: we will select all the quarters available.
Once all dimensions have been selected we need to go to: “Choose how you want to visualize
Then we should press “submit selection”. A new screen appears where we can see the series.
Check everything is fine there, if not go back and repeat the previous steps. Now we are ready
“go”. The Excel file will appear on the bottom of the screen to your left. If the security options
are very strict a message will pop up saying whether you allow the file to be downloaded and
you should allow it explicitly.With this information you have to calculate the following rates
of growth:
– quarter to quarter rate of growth: ((yt/yt-1)-1)*100
– year over year or four quarter rate of growth: ((yt/yt-4)-1)*100
– quarterly growth at an annual rate (quarter to quarter compounded into an annual rate):
(((yt/yt-1)^4)-1)*100
With the series you have just generated:
1. Draw a graph to represent the quarterly rates of growth of GDPpc from 1995QI-2019QIII
indicating the periods of recession of the Spanish economy in 1995-2019.
2. Draw a second graph to represent both the year to year rate of growth and the quarterly
growth at an annual rate. Write a short text (about 200-300 words) explaining the current shortrun position of the Spanish economy.
You have to hand in: 1) the two Graphs; 2) the identified periods of recession; and 3) a short
text commenting what is the current short-run position of the Spanish economy in the last
quarter of 2019 (Is decelerating, accelerating, stable…?)
Exercise 3.1(this is optional)
Take as reference the same data file as Exercise 1.1. Choose a variable of your choice (labor
productivity; total factor productivity; GDPpc, human capital, employment rate, R&D
expenditure, etc.) and try to identify in terms of that variable what are the periods of
convergence/divergence between the Spanish economy and the EU. Draw a graph and make a
short comment.

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