Assignment Task

Case Study

Course learning outcomes addressed 

This task addresses course learning outcomes 1, 2, 3, 4, and 5

1. Apply economic principles that determine the allocation of resources in financial markets;
2. Synthesise knowledge, concepts, theories, and processes pertaining to the functioning of financial institutions, regulation, structure, risk management and the impact of economic policy on the financial system;
3. Use critical thinking skills to constructively and logically solve problems, and engage in theoretical debates about transaction costs, economies of scale, adverse selection, moral hazard, the principal-agent problem, the term structure of interest rates and the conduct of central banks;
4. Apply economic and financial knowledge and technical skills to determine the likely impacts of government policy and the interplay of demand and supply factors on key economic metrics including interest rates, inflation and economic growth;
5. Work collaboratively and apply the literacy and numeracy skills required of financial services professionals, to interpret written and graphical information, to explain financial policy and regulations, and perform calculations facing managers of financial institutions.

Task Description 

The purpose is to allow you, in addition to meeting these learning objectives, to explore key developments in the Australian economy and monetary system. 

Task Details 

Details: The Reserve Bank of Australia produces a large volume of reports, analysis, essays, statistics etc. You are interning at the RBA for a summer, and they set you to work on what appears to be a simple task: To prepare a report on the monetary and economic history of Australia from 2000 to 2023, with an emphasis on interest rates. Your supervisor puts some parameters around the task to make it manageable:

1. Only use the RBA’s own statistical tables.
2. Only cover interest rates (cash rate and bond yields), money supply (M2), the price level (inflation rate, CPI), and income (GDP).
3. Place your analysis in the Keynesian liquidity preference framework.
4. Use at least 6 other scholarly references to support your work. The most obvious way to accomplish this is to seek academic papers that identify well-known connections between elements of your analysis. For example, the relationship between money supply and interest rates.

The key performance indicator is how well you link the history/statistics with the theory. Reporting the statistics is relatively straightforward, but the connection with theory is the higher-level aspect of the task and the key to producing something of value. Obviously, there is no single correct answer. Analyses that differ substantially could both be awarded high praise from your supervisor because they each demonstrate the ability to weave the theory and discussion around the statistics.