CPI and real GDP can maintain a high statistical correlation
the verdict
SUPPORTED
the evidence backs this
refutedsupported
the weight of evidence
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Economic literature demonstrates that real GDP and CPI can exhibit clear statistical relationships and directional co-movement over both short and long horizons.
This study looks at how Somalia's trade balance has been affected by variations in the exchange rate, addressing the gap in empirical research on the relationship between macroeconomic variables and trade performance in fragile economies. The study used time series data sourced from the World Bank, SESRIC, the Central Bank of Somalia, and the IMF. The study employed augmented Dickey-Fuller tests and Phillips-Perron tests to assess the stationarity of the data. The study utilized an autoregressive distributed lag (ARDL) model to identify both short-term and long-term effects of exchange rate volatility on Somalia’s trade balance. The study found that over time, GDP, along with the real effective exchange rate (REER), had positive impacts on trade balances, whereas inflation rates and foreign direct investment (FDI) negatively influenced Somalia's trade balance in the long run. In the short term, there is a significant positive correlation between GDP, FDI, and REER and the trade balance, whereas the Consumer Price Index (CPI) has a negative impact. These are clear indications that any slight change in economic performance, changes in the value of money circulating, or inflation levels shall be reflected accordingly in Somalia’s trade balances. In terms of trade politics, the government of Somalia should focus on economic diversification, enhancing export competitiveness, and maintaining price stability to achieve sustainable trade and economic growth.
The “lost decades” and its solutions, especially Abenomics are famous topics when discussing about Japan’s economy. This paper mainly focused on the relationship between CPI, M2 and real GDP of Japan in both short and long run using VAR model and cointegration analysis, and find out that: (1) Changes in money issuance and gross output in the short run have a positive effect on the increase in the price index; (2) The increase in monetary issuance and price level does not directly bring about an increase in output, but rather affects the demand and reduces the GDP growth rate; (3) The real GDP performance in the long run shows changes in the same direction as CPI, M2 and the time trend. CPI has a positive effect on disequilibrium, while changes in M2 have the effect of eliminating the disequilibrium.
The article aims to use linear regression model to analyze quantitative correlation of real interest rate and three economic indices, namely real GDP, CPI and unemployment rate based on data of France, Germany and Italy. When the government tries to control the economic condition by adjusting interest rate, a clear quantitative correlation between interest rate and some important economic indices can make the consequence more controllable. A research based on real data can also help avoid mistake due to inconsistency between theoretical model and real life. As a result, the final model reveals that real GDP is negatively correlated with real interest rate, while CPI and unemployment rate are both positively correlated with real interest rate in short term, which is opposite to the initial expectation of CPI and unemployment rate. Such consequence may suggest the government to consider the possible opposite result in short term when they try to adjust the price level by altering real interest rate, as well as the unexpected change in unemployment rate.
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