ASSIGNMENT NO 1 After Mid

NAME: .Muhammad Umer Farooq (007)

.Syed Aoun abbas (271)

.Husnain Zafar (001)

. Zain Raza (20020920-113)

.M. Khalid Abrar Sahi (20020920-054)

SUBJECT: “Macro-Economics”

SECTION: Section (A) 3rd S.

SUBMITTED TO: Sir. Jawad Saleemi

ASSIGNMENT TOPIC: COMPARISON OF PAKISTAN & CHINA

(GDP, inflation rate,monetary
interest rate, unemployment rate and
consumer index
 1. Syed Auon Abbas Haider

Pakistan GDP historic data china GDP historic data

year GDP growth 1 GDP growth 2
2012 3.51% 7.86%
2013 4.40% 7.77%
2014 4.67% 7.43%
2015 4.73% 7.04%
2016 5.53% 6.85%
2017 4.43% 6.95%
2018 6.16% 6.75%
2019 2.50% 5.95%
2020 -1.27% 2.24%
2021 6.49% 8.11%

Blue shown Pakistan red line of china.

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

-2.00%

Comparison GDP (2012 TO 2021)

GDP stands for Gross Domestic Product, and it is a measure of the total economic
output of a country. It represents the market value of all final goods and services
produced within a country's borders in a given period of time, usually a year.
 In other words, GDP is the sum of all the goods and services produced by a
country's residents, regardless of their nationality, within its borders. It includes
everything from the production of consumer goods like cars and appliances to
the provision of services such as healthcare, education, and transportation. GDP
is often used as a key indicator of a country's economic health and is closely
watched by policymakers, investors, and businesses.
 The GDP of Pakistan has generally shown an increasing trend from 2012 to
2021, although the growth rate has varied from year to year. During this period,
Pakistan experienced a positive GDP growth rate in most years, with the
exception of 2020 when the GDP contracted due to the impact of the COVID-
19 pandemic. Overall, the GDP growth rate of Pakistan has been relatively
volatile, but the trend has been generally positive.

 Gross domestic product in china 2012 to 2022

The gross domestic product (GDP) of China from 2012 to 2022 (forecast) is as
follows, based on data from the World Bank and International Monetary Fund
(IMF):
2012: $8.61 trillion 2013: $9.61 trillion
2014: $10.48 trillion 2015: $11.06 trillion
2016: $11.94 trillion 2017: $13.61 trillion
2018: $14.14 trillion 2019: $14.38 trillion
2020: $14.72 trillion 2021 (forecast): $17.48 trillion.
2022 (forecast): $18.83 trillion.
Please note that the 2021 and 2022 figures are forecasts and may be subject to
change. Additionally, different sources may have slightly different figures due to
variations in the methodology used to calculate GDP.
 “The comparison of both countries GDP”

Pakistan's GDP Growth.

GDP of Pakistan growth in 2012sa 2021
The Gross Domestic Product (GDP) of Pakistan is the market value of all final
goods and services produced within the country in a given period of time. The
GDP growth rate of Pakistan from 2012 to 2021 is as follows:
2012: 3.7% 2013: 4.4% 2014: 4.7% 2015: 4.1%
2016: 4.5% 2017: 5.8% 2018: 5.5% 2019: 1.9%
2020: -0.5% 2021: 6.5%
It is important to note that the COVID-19 pandemic had a significant impact on the
global economy, including Pakistan's, which saw a contraction in GDP in 2020.
However, there are signs of recovery as the country's economy has started to
rebound in 2021.
GDP of Pakistan growth in 2012sa 2021 increase to decrease?
 The GDP of Pakistan has generally shown an increasing trend from 2012 to
2021, although the growth rate has varied from year to year. During this period,
Pakistan experienced a positive GDP growth rate in most years, with the
exception of 2020 when the GDP contracted due to the impact of the COVID-
19 pandemic. Overall, the GDP growth rate of Pakistan has been relatively
volatile, but the trend has been generally positive.

GDP of china growth in 2012sa 2021 increase to decrease?

The Gross Domestic Product (GDP) of China is the market value of all final goods
and services produced within the country in a given period of time. The GDP
growth rate of China from 2012 to 2021 is as follows:
2012: 7.9% 2013: 7.7% 2014: 7.3% 2015: 6.9% 2016: 6.7% 2017: 6.8%
2018: 6.7% 2019: 6.1% 2020: 2.3% 2021: 8.1%
Overall, the GDP growth rate of China has shown a decreasing trend since 2012.
However, it is important to note that China's economic growth rate remains
relatively high compared with many other countries, even in years when the
growth rate has decreased. In 2020, China's economy was one of the few major
economies to experience positive growth despite the impact of the COVID-19
pandemic.

2. Husnain zafar
year Pakistan inflation rate china inflation rate

2013 7.69% 2.50%

2014 7.19% 1.50%
2015 2.53% 1.60%
2016 3.77% 2.10%
2017 4.09% 1.80%
2018 5.08% 1.90%
2019 10.58% 4.50%
2020 9.74% 0.20%
2021 9.50% 1.50%
2022 12.50% 1.30%

Blue shown Pakistan red line of china.

0.12

0.1

0.08

0.06

0.04

0.02

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
 Comparison of inflation rate (2013 to 2022)
What is inflation?
The simplest way to describe inflation is that it increases the price of goods
over time. Conversely, it's also the decline of purchasing power over the
same period. For example, if a pack of gum costs $1 today and the inflation
rate is 5% annually, next year, the gum will cost $1.05. The price of the item
went up, and the purchasing power of your dollar went down.

 Inflation is the opposite of deflation, where prices decrease and purchasing

power increases. The amount of inflation is measured by the Consumer Price
Index (CPI), which averages the prices of a basket of goods and services.
 China inflation rate decreases consistently in 2013 it was 2.5 and in 2014 it
was 1.5 a 1% decrease from last year and 0.1 increase in 2015 and in 2016
0.5 increase from last year in 2017 it was 1.8 decrease of 0.3 in 2018 1.9 and
0.1 increase in 2019 it was 4.5 increase by 2.6 in 2020 it was 0.2 by a huge
decrease of 4.3 and in 2021 it was 1.5 increase of 1.3 and in 2022 increase by
0.3
 Pakistan inflation rate in 2013 was 7.69 and in 2014 decline in rate by 0.50
in 2015 it was decrease by 4.66 in 2016 it was 3.77 a 0.32increase in 2017
and it was 4.09 a 1.01 increase in 2018 and a huge increase in 2019 by 5.50
and it was 10.58 decrease of 0.74 in 2020 and was 9.74% in 2021 was 9.5
incline of 0.24% in 2022 it was 12.5% and now it is increases by huge
margin because of taking loan from IMF loan and policies poor situation of
country all are a causes of inflation.
 3. Zain Raza
year China unemployment rate Pakistan unemployment rate
2012 4.10% 6%
2013 4.10% 6.30%
2014 4.10% 5.80%
2015 4.10% 6%
2016 4.06% 5.80%
2017 4% 5.70%
2018 4.20% 5.50%
2019 5% 4.10%
2020 5.20% 4.40%
2021 5.40% 6.50%
2022 5.30% 6.20%

Blue shown Pakistan red line of china.

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
“Comparison of unemployment rate (2012 to 2022)”

Unemployment occurs when someone is willing and able to work but does not have a
paid job. The unemployment rate is the percentage of people in the labor force who are
unemployed. Consequently, measuring the unemployment rate requires identifying who
is in the labor force. Unemployment takes a huge toll on mental health. If an individual is
highly qualified, but is unable to find a reasonable job, tension can drain him. The brain
gets affected the most. Long term effects of stress lead to depression, anxiety, low self-
esteem and many other mental health problems.

Here we compare unemployment rates in China and Pakistan.

China:
The exploitation of China's labor force by foreign-owned enterprises leads to the shortage
of domestic enterprises' labor force. Demographic factors also affect unemployment in
China, such as age and sex. In China, unemployment rate is higher in last 4 years which
means more people are unemployed and are not earning which means they are consuming
less in that economy and this affects the aggregate demand in an economy because
consumption is a determinant of aggregate demand.

Pakistan:

unemployment rate is massive in 2012 and 2013 and then it decrease a little bit and then
this is massive in the last 2 years which means are not employed and they have don't
enough resources to consume in that economy and the standard of living of peoples in
Pakistan is lower and that is why it affects the aggregate demand and the economy is not
growing well.
 4. Muhammad Khalid Abrar Sahi

Pakistan consumer
year China consumer index index
2012 2.60% 9.70%
2013 2.60% 7.70%
2014 1.90% 7.20%
2015 1.40% 2.50%
2016 2% 3.80%
2017 1.60% 4.10%
2018 2.10% 5.10%
2019 2.90% 10.60%
2020 2.40% 9.70%
2021 1% 9.50%

Blue shown Pakistan red line of china.

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
 Comparison of consumer index (2012 to 2021)

This data is taken from the World Bank website, so it means this date is referenced to World
Bank website. Consumer index shows that prices paid by consumer in Pakistan and china. The
Consumer Price Index measures the overall change in consumer prices based on some specific
collection of goods and services over time. As we can see on the above graph that china has lies
on and below 2% of line. While it falls currently in last two years

If the see above graph of Pakistan than we can see a massive difference of fluctuation of
9% to 2& and then along the way 9%. Pakistan overall consumer index is high. And the previous
one is all time high. The main reason is currency devaluation in Pakistan dollar overall increases
in Pakistan in past 10 years.it is the factor that all foods prices skyrocket in Pakistan not in years
but in months. The political clash of two parties is also the reason of the devaluation of the
currency, which causes the instability in the equilibrium.

5. Muhammad Umer Farooq

year Pakistan interest rate china interest rate
2013 4.20% 3.80%
2014 4% 4.50%
2015 5.80% 4.40%
2016 -3.80% 2.90%
2017 4% 0.10%
2018 4.50% 0.80%
2019 2.90% 3%
2020 0.70% 3.85%
2021 -1.40% 1.50%
 Blue shown Pakistan red line of china.

8.00%

6.00%

4.00%

2.00%

0.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021
-2.00%

-4.00%

-6.00%

“SUMMARY ON CHINA VS PAKISTAN MONETARY

POLICY”

Natural / Real / monetary interest rate :

The natural interest rate is not necessarily an ‘optimal’ rate, or the real interest rate that would
stabilize output and inflation at any point in time. Instead, it provides a benchmark for assessing
whether monetary policy is exerting an expansionary or contractionary influence on the
economy. It also serves as a guide to where we might expect real interest rates to settle after
temporary cyclical factors have abated.
Introduction on China:

China was able to transform its economy and grow so rapidly since its opening-up policy started
in 1978.

Chinese monetary policy conduct between 1987 (the first year with reliable consumer price
index data) and 2006.China was able to change from a high and volatile to a low and stable
inflation environment between the 1980s and the 1990s due to reforms that established the
operational independence of the People’s Bank of China (PBC).

In the late 1980s and early 1990s, China experienced high and volatile inflation—reaching 19%
in 1988 and 24% in 1994. However, inflation fell over 1995–98, and it has been low and
relatively stable since.

“China’s policy indicators”

 Providing estimates of China’s natural interest rate, a key contribution of our paper is to
propose a method to estimate the output gap and other unobserved variables using
Chinese macroeconomic time series. The key to our approach is to use multiple data
sources to form inferences about unobserved latent variables. We use data on GDP,
import values, railway freight volumes and the volume of electricity usage as indicators
of economic activity, and both the consumer price index (CPI) and producer price index
(PPI) as measures of underlying inflation. Individually, each of these measures have
drawbacks. For example, GDP growth shows little quarter-to-quarter variation, while
railway freight volumes provide little insight into economic activity in the services
sector. But by extracting the common component from multiple series, we are able to
shed light on the Chinese business cycle and trends in the rates of economic growth and
inflation.
 Our main result is that China’s natural interest rate averaged around 3-5 per cent
between 1995 and 2010, but has declined more recently to be about 2 per cent as of
2020. Assuming an annual inflation rate of 2-3 per cent, which is consistent with recent
inflation outcomes and the inflation objective laid down by the National People’s
Congress, this would imply a natural nominal interest rate of around 4- 5 per cent. 4 This
 is higher than the natural interest rate estimates typically generated for advanced
economies.
 the Chinese economy was operating above full capacity for the entire period between
2004 and 2016, with the degree of overcapacity exceeding 10 per cent for much of that
time. Similarly, the estimates in Li and Su (2016) suggest that monetary policy in China
was highly expansionary for their entire sample period. Both sets of estimates are hard to
reconcile with the behaviour of inflation which has, if anything, become more stable
over the past decade.
 A more recent paper by Xu and Jia (2019) estimates the China’s natural rate using a
variety of models, including a Laubach and Williams-style model and a small DSGE
model, over a sample spanning 1995-2018. They recover lower estimates of the natural
interest rate, of typically between -4 and 4 per cent. However, because their measure of
monetary policy is a shadow interest rate, constructed as a weighted average of M2
growth and the 10-year government bond yield, it is hard to say what these estimates
imply for the natural real policy rate. In contrast, our approach provides an estimate of
the natural interest rate that (after accounting for inflation expectations) is directly
related to the policy interest rates used by the People’s Bank of China (PBC) to conduct
monetary policy.

Pakistan’s policy indicators

3 Monetary Policy and Inflation:

 The State Bank of Pakistan’s (SBP’s) monetary policy is normally a hot topic amongst the
investment community and at certain points in time it receives broader media coverage as
well.
 The rate of interest is an important variable that affects consumption, investment and
growth in the economy. It also influences the portfolio allocations of investors
between equities and fixed income, with the relationship normally being inverse, i.e.,
when interest rates are higher, investors get higher returns from fixed income
investments while equity valuations decline.
  Conversely, when interest rates decrease the return from fixed income drops and
equity valuations rise. Therefore, investors prefer fixed income in higher rate
environments and equities in lower rate environments.
 Since 1992, we have had 15 distinct cycles of rate hikes and cuts. A cycle is defined
as the period of time between the first change and last change.
 . The highest discount rate we have witnessed was 20.0% in 1996 and the lowest was
6.25% in 2016 while the average has been 11.6% (9.9% during the current century).

Hikes vs. cuts

In terms of average change in interest rates, the length and number of policy decisions there is
not much difference between a rate hike cycle and a rate cut cycle. The most notable difference
is observed on the time lag between policy changes.

The other major difference is how the equity markets behave during these cycles. On average the
equity market loses 3.04% in value during a rate hike cycle with the biggest decline being -
25.81% (January 2018 to July 2019). Conversely, during periods where interest rates are
declining the KSE 100 index on average generates a return of +28.07%, with the biggest increase
of 79.35% occurring during the July 2011 to June 2013 cycle.

Lessons for today

The current rate hike cycle started in September 2021 and as of the last increase in May 2022 has
lasted 8 months against the average duration of 1 year and 2 months. We have so far witnessed a
jump of 6.75% in the rate which ranks second in terms of the sharpest hiking cycles (after the
2005-08 and 2018-19 cycles of 7.50% each) and is above the average increase of 4.4%.

 We have had 5 policy decisions (the pauses in January and March do not count) against
the average of 4.4 hikes per cycle while the equity market has declined by 8.82% during
this period. Put in the context of expected inflation over the next year and ongoing
negotiations with the IMF (International Monetary Fund), we may be near the end of the
current cycle. Recall that in 2008, inflation peaked at 25% while interest rates topped out
at 15%.
 The major risk to this outlook is commodity pricing and political uncertainty which could
destabilize the economy to a possible default if the safety net of the IMF is not procured.
If we assume that May 23rd 2022 was the last rate hike then history tells us that the next
cut cycle should occur during the first quarter of 2023.
 And what should we expect from interest rates and equity markets if this is the end of the
current cycle? Well on average interest rates drop by 2.6% one year after the last rate
hike and a decline has been observed within 12 months after all rate hike cycles except
for 1 (November 2013).
 Similarly, equities have generated a positive return in the 12 months following the last
rate hike in all cycles except for 1 (November 2008). However that was a special case
where the market remained frozen for several months and crashed when it was reopened.
The average return in the year after the last rate hike is 26.7%.
 For investors, it would be wise to track developments over the next 3 months. If clarity
emerges on the political and economic front then a historical perspective could prove to
be a valuable tool in determining asset allocation.