Economic Roles of a Business Essay

A business is an organisation that attempts to satisfy the needs and wants of a community by providing goods and services, however, a business does not exist only to serve the community, it also exists to maximise the financial investments of their owners. This is done through the social and economical role of a business. Economic roles are concerned with the financial impacts that the activities of a business have on various groups in the business environment. The economic roles are wealth creation, employment and innovation. Social roles are focused on the impacts of a business on the community. Social Roles are entrepreneurship, choice and quality of life. Economic roles are important for a business as they can increase the value and funds via wealth creation, employment and innovation. Wealth creation is done by increasing sales and developing strategies to promote brand awareness and sales. This will increase the value of the funds that owners have invested in the business. Businesses also generate increased wealth for the community. The profits generated are then taxed by the government in order to fund essential services such as improving educational, health and transport facilities. Employment is where the owners of a business will employ other people to perform various activities within the business. The goods and services that businesses provide to the community are formed using knowledge, skills and effort of human resources, because of this, employment is an important function in business. The third economic role, innovation can be defined as the process of improving the features of a product. It could also apply to the production process where improved methods of production are implemented. The new methods may make use of fewer resources and result in increased output, which would benefit the business in many ways. In the business environment, innovation is crucial for a business to maintain its competitive advantage over other businesses. The social roles of a business impact communities by improving their quality of life, choice in products and providing entrepreneurship. The quality of life of a community is improved through the variety of products and services provided by businesses. Organisations spend millions of dollars each year in business research and development to find ways to improve the quality of life. Many of the products that businesses provide are wants and not needs; they are often aimed at providing greater convenience for those with a busy lifestyle. An example of this is pre-prepared meals. Through the production of these products, the financial investments of the owner of the business are maximised. Most businesses operate in a competitive market; this means there is a large number of competitors offering similar goods and services. This provides a range of choice for the consumers. This choice encourages businesses to provide their products and services at the lowest possible prices, with the highest quality. Choice also encourages a business to be innovative and different from their competitors so that their product will be the one chosen by the consumer and profits can be made. An entrepreneur is an individual who has developed particular ideas and is willing to take a risk to execute these ideas through a business. They take risks by thinking up strategies for their ideas to be successful; this is why they pursue different goals as part of the operation of business. Through business entrepreneurs are given an opportunity to make their ideas a reality. The economic and social roles of a business, wealth creation, employment, innovation, quality of life, choice and entrepreneurship, are important to maximise the financial investments of the owners, without them, a business would not thrive or gain profits.

Quality of Care in Health Care Settings Essay

Questions Answered: What is the problems with quality care today? Why is quality of care lacking in areas? Quality of care plays an important role in assuring the standards of nursing performance. By providing specific performance requirements, standards of nursing performance can improve and provide quality of nursing care in health care settings (Scope & Standards, pg 33). Quality care is one of the most significant nursing standards of modern time. This particular standard must be implemented by nurse’s everyday. One of the main concerns in nursing practice today, is quality of care in the health care setting (iom.edu). Recent reports from the American Nurses Association (ANA) and the Institute of Medicine’s Quality Initiative (IMQI) brought immediate attention to the public on the collapse of quality of care. The reports focused on the need to recognize, develop, evaluate, and ensure the quality of health care in the United States (nursing world.org). Both the ANA and IMQI represent a systematic effort to advance health care quality and patient safety concerns. Many other institutions have felt the need for further disciplinary actions to improve quality of care in healthcare settings. Organizations such as the American Heart Association and Agency for Healthcare Research and Quality have also recommended that the healthcare system launch a systemic proposal to increase the quality of care. The American Heart Association has made the Quality of Care and Outcomes Research Interdisciplinary Working Group (QCOR IWG) to provide quality care to heart patients (americanheart.org). The QCOR IWG is a multidisciplinary group committed to making a significant contribution to improving patient outcomes and healthcare quality. The Agency for Healthcare Research and Quality developed a National Healthcare Quality Report to facilitate the needs of patients around the United States. By doing so, they are raising awareness to healthcare institutions for the improvement of quality of care (ahrq.gov). Private groups such as the National Quality Forum (NQF), Leapfrog group, and the Joint Commission on Accreditation of Healthcare Organizations (JCAHO)  made recommendations and efforts to ensure healthcare quality. All of the organizations are trying to make an attempt to lower client dissatisfaction, identify specific quality indicators, and increase the quality of care in every health care institution in the United States (ahrq.gov). A 2004 study, done by the Agency for Healthcare Research and Quality, concluded that 45.1 percent of people were not receiving the care they needed (ahrg.gov). Healthcare systems are now aiming at quality improvement, education, and implementation of quality care (ahrq.gov). The ANA gives reasons for the lack of quality care in institutions today. One of these reasons is the lack of professional care. The registered nurse (RN) has one of the lowest censuses of the healthcare professionals and highest in demand. RN’s are now faced with an enormous amount of patients, little time to care for their individual needs, and long strenuous work hours. Longer hours from the nursing shortage lead to RN burn-out. This burn-out creates decreased quality of care, medications errors, and an increase of patient safety risks (nursingworld.org). A nurse, D. Thomas, from the local Nursing Home discussed her time of burn-out. She states,One day, I had thirty patients to care for all by myself. I had two nursing aides that did everything except medications. The whole day I passed out dozens of meds. They didn’t have anyone for the next shift and my manager asked if I could work some over time. I worked sixteen hours that day. I made three medication errors and two patients had new pressure ulcers, but there was no one else to care for these individuals. The bad thing was, I didn’t even care for them, I just handed them their meds. The aides did all of the work because I was so pressured for time. That’s the way it is now, more nursing aides and less nurses. No one wants a nurse’s job because it is not what it seems (D. Thomas, personal interview, October 31, 2007). Some healthcare facilities have instituted more unlicensed personnel to take place of the professional nurse. This is thought to be a way of quickly saving money for the institution. Staff substitutions have become major  issues for patients today. In 1996, the ANA conducted a survey examining the concern of the quality of care in health systems. Out of all the adult clients polled, three-fourths indicated a serious concern that good quality of care is harder and harder to find. Thy also concluded that substitutions can be a â€Å"quick fix† to save money, but in the long run, they will minimize the quality of care for the patient (nursingworld.org). Another major issue that limits quality of care is insurers. Insurers are tearing down refund rates and decreasing the number of services covered (Scope & Standards, pg 18). I found this statement to be true when I interviewed a patient, C. Erlain, who is a Blue Cross Blue Shield health plan member. He states,My insurance does not cover all of my procedures and tests. I am mad because I pay a lot of money each month to have good coverage and I don’t get the care that I need. One time I was at the doctors and he said that he could only spend fifteen minutes with me because my insurance does not allow me to go over that amount of time. I was so frustrated. How would I get the care I needed? Even if I got another plan, they would also have restrictions, so I don’t get the care that I want or need. If I could say anything to those insurance people, it would be why am I paying for something that doesn’t care about my health? Those people only care about the money, not the people. It’s unfortunate (C. Erlain, personal interview, November 2, 2007). From my own experience in home healthcare, I was only allowed a limited amount of time to spend with the patient depending on their insurance. It was either fifteen minutes, thirty minutes, or one hour. Sadly, this was no always the best scenario for the patient. Although the patient was getting care, it wasn’t the care that they would have liked. One patient said to me, â€Å"Do you have to go already?† I was so busy that I could not stay and I knew no one could cover for me, so I left. It saddened me to feel that I hadn’t done my job to its full capacity. I had too many patients and too little time. An insurer made my patient visits more of a â€Å"hello† and â€Å"goodbye.†Americans are limited when it comes to healthcare benefits and insurers are escalating insurance premiums (Scope & Standards, pg 18). The estimation of uninsured individuals in the U.S. reached forty-five million  in 2002 according to the American Hospital Association. Forty-five million Americans will not even have the opportunity to receive any healthcare, let alone have quality healthcare (aha.org). To expand the seriousness of the recommendation for quality of care, quality initiatives are going to large and small institutions to implement these suggestions. The government had made the Agency for Healthcare Research and Quality to bring about issues in the quality of care in healthcare settings (ahrq.gov). Implementing this task force helps to improve the quality of healthcare. It also better insures the health client that they will be provided with adequate care for their healthcare needs. Improving quality of care is a team effort. The government bureau, healthcare agencies, and many other organizations are working vigorously to take an active role to enhancing the quality of care in healthcare settings. By doing so, this team effort will reach its goal to help patients to receive the quality of care they deserve. Reference List Agency for Healthcare Research and Quality. (2007). Guide to Healthcare Quality. Retrieved October 29, 2007, from http://www.ahrq.gov/American Heart Association. (2007). Quality of Care and Outcomes Research Interdisciplinary Working Group. Retrieved October 29, 2007, from http://www.americanheart.org/presenter.jhtml?identifier=3016540/American Hospital Association. (2002). Medical Liability: A Looming Crisis? Part I& II. Retrieved November 2, 2007 from http://www.aha.org/aha/research-and-trends/AHA-policy-research/2003-or-earlier.htmlAmerican Nurses Association. (2007). ANA’s Safety and Quality Initiative. Retrieved October 28, 2007, from http://nursingworld.org/MainMenuCategories/ThePracticeofProfessionalNursing/PatientSafetyQuality/NDNQI/Research/QIforAcuteCareSettings.aspxAmerican Nurses Association. (2004). Scope and Standards of Practice. Silver Spring, MD: ANA. Institute of Medicine’s Quality Initiative. (2007). Health Care and Quality. Retrieved November 2, 2007 from http://www.iom.edu/CMS/3718.aspx

Rate of reaction = change in absorbency/change in time Essay

Average absorbency = Test 1+2+33 eg. 20i C, at 1min 0. 13+0. 16+ 0. 15 =0. 15 3 Also to back up my results I found out what the rate of reaction was for each temperature, using the averages calculated before. I did this by using the following formula: Rate of reaction = change in absorbency/change in time eg. 100i C, 4 minutes: 0. 53/4= 0. 1325 Skill C-Analysing Evidence And Drawing a Conclusion Graph Analysis: Average absorbency graph: Looking at this graph shows me the trends that occur in my results. The ability to draw a line of best fit showed that the points lie on a line of positive correlation. 80i C had the most pigment released after 7mind and with 20i C. The 20i C, 40i C and 60i C were all where I thought they should lie. 60i C released more than 40i C and that temperature released more than 20i C. Also the line of best fit showed that the amount of pigment released increased as time passed. Which is what I predicted. The reason for this is that more pigment is being released into the surroundings. at 20i C, 30i C, 40i C pigment is released at a steady rate and 60i C. 70i C and 80i C the speed of absorption has increased. This explains the steady absorbency as temp goes up. A reason for the pigment escaping could be that the proteins in the cell membrane could get denatured, meaning that the pigment can escape. Therefore at a higher temperature the cell wall becomes unstable quicker and denatured allowing pigment to escape into the water. The fact that heat is known to denature proteins could prove that is why the pigment escapes. The graph and table show that there is a greater absorbency margin as the temperature increases. This can be seen when comparing 40i C the rate of reaction decreased as the experiment went on. However with 2i C the rate of reaction actually increased as the experiment went on. This is surprising, as I would have thought that the rate would decrease as it did in most cases. E. g. for 80i C the rate fell from 0. 15 to 0. 078, and to show the large gap 60i. The rates of reactions were in the same order as the amount of pigment graphs, the 100i C rate is faster than the 80i C and there is the large gap between them and the lower temperatures. I expected the rate to decrease, as there would be less pressure inside the cell as the pigment escapes from the cell. This would mean that the pigment would not escape as fast because it isn’t getting pushed out as fast. Also the water potential either side of the cell wall will start to level out which would lower the rate of diffusion of the pigment. At first with all, but 2i C, the rate of reaction is very fast then it starts to slow down. This backs up my theory that the pressure gets less. Because as more pigment escapes out of the cell the less pressure which will slow the rate down. And as there will be lots of pigment at the start then there will be high pressure so the rate of reaction will very fast, as shown in the graph. Anomalous Results: When looking at the graph I can see that there are no anomalous results, which could indicate that the experiment was quite precise, but that does not mean that it is accurate. The readings I got might be along the same trend but that trend could miles off the actual value. This normally suggests that it is not down the human error but the equipment used is the cause for error. However if I look at the table of results I can see that there are two anomalous results that do not fit in with the trend. This could be down to human or experimental error. Skill D-Evaluating Evidence and Procedures Changes to The Experiment: The experiment was changed to make it easier to take results, by using a full test tube colorimeter with the beetroot on pins to make it quicker to pull out after the short time limit. There would be a increase of pigment released due to the pin being inserted to the beetroot but washing off the excess pigment in the water bath for 2mins beforehand will have reduced the error for this. Criticism of Apparatus: Show preview only The above preview is unformatted text This student written piece of work is one of many that can be found in our GCSE Patterns of Behaviour section.

Behavioural theories Essay Example | Topics and Well Written Essays - 3500 words

Behavioural theories - Essay Example Different theories may vary depending on the manner in which they are tested and developed. For instance behavioural theories are theories that attempt to give an explanation concerning the reasons behind the changes in a person’s patterns of behaviour. Behavioural theories cite personal, behavioural, and environmental traits as a key factor in the determination of an individual’s behaviour. In recent studies, there has been a demand for the utility of these theories in education, health, energy, international development, and criminology areas with the wish that when the behavioural theories are understood, then the services that are given in this area would be improved (Nutbeam, 2000). This paper explores different behavioural theories and the understanding of behaviour. Recent studies have shown that that the key theories, which are the baseline for the current understanding of the behaviour theories, were documented in the 1980s. Some of these theories include icek Ajzen’s and Martin Fishbein works on the ‘reasoned action theory’ (Ajzen, 1985). ... esearch towards the understanding of behaviour change management alngside widening the base of the research so as to revise the current theories whose key focus is on initial changes (Akers, & Krohn, 2009). Certainly, the behavioural theories focus on a variety of factors that attempt to give an explanation of behavioural change. Example of these theories include social, cognitive theory, reasons action theory, learning theory, transtheoretical theory, health process action theory, and the planned behaviour theory (Bandura, 1989). There are some specific elements that could be applied in these theories. One key example of the elements is self efficacy, which can be applied to almost all these theories. Self efficacy is a person impression concerning his ability in performing a challenging task like going through surgery. Such an impression relies on factors such as a person’s prior success in that task, tasks that are related, the physiological state of an individual, and the persuasion source from outside (Bandura, 1989). Self efficacy is believed to be a prediction of the level of efforts that an individual will release in maintaining and initiating a change in behaviour (Elton, 2003). Learning theory, on the other hand, is a theory that originated from behaviourists such as B.F Skinner. The theory argues out that behaviour that is complex could be learnt slowly by modification of behaviours that are simple (Skinner, 1957). In this theory, reinforcement and imitation have a significant role to play. In this respect, an individual will learn through copying the behaviour that he observes in other people. Additionally, rewards are useful in ensuring that the desired behaviour is repeated. Whenever behaviour comes about due to reinforcement and imitation, there would

Im attaching the file that has all the information you need Essay

Im attaching the file that has all the information you need - Essay Example In other disciplines, mostly economics, international relations, political science, cultural studies, films and media, marketing and advertising, and communication, the probable date when globalization actually began was from1970s. It is difficult to comprehend such a significant occurrence in world history just began in the last four or three decades ago. These occurrences that began in about four decades ago merely accelerated the process of globalization, and as such they do not predict the actual date of globalization, they are just the antecedents of globalization. This paper seeks to get the deeper meaning and definition of the term globalization and the important factors that accelerated it. The paper also analyses three different phenomena which show indicate the existence and slow spread of globalization which dates back nearly 600 years ago and finally I would carefully present my own perception of the concept. Shortcomings of the Presentist Approach The mere understanding of the concept of globalization from the perspective of complex connectivity only refer to the concept in modern times, but ideally the analysis of the term implies economic, social, cultural, and political activities of human began much further in time. The term globalization was initially used in the business disciplines; in fact, it was first used in this field in 1970s, is has since spread out to other studies. According to Jones ‘†¦.thinkers began to refer to this process as globalization and by the 1980s this was already becoming one of the key vogue concepts pushed in both the academic literature on management and in the popular business literature†. The rise in the use of the term is mostly associated with the post war periods when many multinational corporations were setting up footprints in other countries, then the growth in information and communication technology, jet travel, global value chains, global advertising and global finance. The presentist vie ws of the term globalization do reveal very many short comings of their understanding of the term. First, due to their leanings, very many research works on globalization tends to overlook structural patterns, they present as original the older features and misreading of contemporary trends. Second, this view implies a Eurocentric view, meaning that world history probably began with the rise of western imperialism many dub it as the â€Å"the rise of the west†. Consequently, this perception of globalization ignores or down plays contribution to globalization by non western societies. These perceptions tend to downplay the historical perspective of the concept and present a narrow understanding of both history and globalization with understanding of the term modernity. Vary many historians have accounted for the concept without necessarily referring to the word itself, in fact; they recorded happenings that implied globalization before the advent of the word globalization. By any account, this is merely a semantic problem, as historians have found evidence of wide and deep infrastructures of global network amongst different societies without necessarily using the term globalization. Globalization is an approach that asserts that the world has never been isolated, unconnected communities, trade and other social interactions have

Case for Human Resource Management Essay Example | Topics and Well Written Essays - 500 words

Case for Human Resource Management - Essay Example ion line itself represented threats to their physiological needs, such as demanding quality improvements and changes to how the work was conducted to meet new standards. In addition, their basic needs for security and belonging were being threatened by different cost-cutting efforts that could have, at the perceptual level, put them out of a job. These needs strongly influence whether they find value or self-confidence in their job roles, therefore issues of motivation needed to be addressed at the human resources level. People and their motivations are strongly connected to whether any structural or process changes meet with improved productivity, therefore they could not simply be dismissed. Employee needs will impact their dedication levels to meeting organizational goals or even, possibly, make them look for different work at another organization which could put high costs on the recruitment and retention budgets. At one company I worked for, there was a major project to improve the business resource planning software package so that inventory, purchasing, invoicing, and raw materials monitoring could be improved by a large margin. Technology in this case promised to eliminate all manual checks for inventory and also promised to reduce the amount of labor needed in the purchasing division. Throughout the entire project, which lasted about 18 months, workers were simply reminded that they needed to find other employment after the project was launched or try to find an opening in a different division through a bidding process. Instead of providing counseling services or trying to motivate employees to assist in the project development, the human resources angle was missing and workers kept trying to sabotage the new project to make sure it did not launch successfully. If the company had realized motivational needs in these soon-to-be-displaced employees, I believe the project would have been re ady for launch much faster than the 18 months it took to

Memo 3 Essay Example | Topics and Well Written Essays - 500 words

Memo 3 - Essay Example Secondly, in line with Petrolia’s success, it is on the negative since the mining of oil has been destructive and harmful to the people hence she may not awarded the justice it deserves. For the state of Petrolia to pursue this case versus the United States, the international law embraces world wide peace to be upheld by all member states. It is stated in the united Security Council charter that no member state shall be involved in the internal affairs of any nation. All member states enjoy their right of sovereignty without external influence. It is on this note that the united sates failed to follow and obey the rule of law in involving the crisis between Petrolia and the rebels. The Security Council was supposed to give consent on the issue for the United States to move in with the interest of solving the crisis. It is on this ground that the international law favors Petrolia since her rights has been violated. Secondly, she surprised the world community to strike Petrolia in the name of preserving international peace. This was totally out of order since our affairs do not pose any harm in the region thus there was no need to attach us. In addition, The united states was biased in dealing with these issue it was like supporting the northwest to be independent so as to avail her interest of oil in the region. It is evident that her rush to announce war on Petrolia was an act of catalyzing the effort of declaring her interest in the oil fields. This shall be enough evidence to show that their move of attacking Petrolia’s military was negative driven. This articulates that the international law shall favor Petrolia. In regard to the second question of succeeding in this dispute, the office of the attorney wishes to note that the sate will not succeed since in the process of oil mining it has failed to take care of her citizens. It has exposed her people to health hazards, which has seen an increase of cancer cases in the area as a

Critical research paper Essay Example | Topics and Well Written Essays - 1250 words - 1

Critical research paper - Essay Example Creon judgment that Polyneices body was not to receive a proper burial brought out different characters of Antigone and Isemene. Polyneices body would be left unburied and be consumed by birds or animals (Heaney 2). Antigone and Isemene are different in their conduct as exposed in their character. Wolf (6) highlights that; Antigone has strong convictions and chooses to follow them. In contrast, Isemene is complacent and reluctant to act upon her convictions. Antigone believes that their brother should receive a proper burial by performing apposite burial rites. Although Polyneices was the aggressor in Thebes struggle, Antigone considers that he should be buried since he was a member of the family. Antigone’s actions are visualized as a reflection of her will because she defies the king. Greek women did not enjoy freedom as the men did. This is why Creon’s determination to defeat Antigone is motivated because she is a woman. There were societal structures accompanied by rules that defined the place of woman in Greek. Men were placed higher in hierarchy than women. Antigone perspective repels the stipulated gender roles because she is rebellious. Antigone breaks the rules of Greek culture by refusing to be passive. Isemene chooses to be compliant with the rules of Greek culture to avoid displeasing her customs. Isemene’s perspective on men is that they are superior to women and women should be submissive. Cultural viewpoint on men as superior to women makes Isemene believe that men should be obeyed. Isemene realizes the short falls of the Greek’s perspective on women as problematic. Creon sees his mistake and cannot apologize to a woman, because he would go against his cultural practice. The outstanding behavior of Antigone as a woman is that she defies the kings decree, yet she is a woman. Even though disobedience punishment is death, Antigone chooses to disobey Creon who is also a member of her family

Innovative Change Paper Research Example | Topics and Well Written Essays - 750 words

Innovative Change - Research Paper Example There is need for these stakeholders to communicate and collaborate effectively for there to be efficient innovative change in the sector. The US Department of Department has taken centre stage in supporting the ‘Flagship Initiative, Collaboration: Open Innovation Web Portal’. This is an online initiative that allows identification of areas of need in the education sector, suggests improvements to solutions and areas that need funding (Open Government Plan: Department of Education, 2012). Through this initiative the Department seeks to create an infrastructure that promotes transformative innovations that are aimed ensuring that every student has the opportunity to get world class education that the system should rightful provide (ED. Gov., n. d.). The initiative aims to provide more insight into the decision making process in the education sector. Additionally, the strategy aims to promote the participation of the public and other stakeholders in the decision making pro cess (Open Government Plan: Department of Education, 2012). ... Redefining the curricula entails the vast expansion of technology and schools are starting to acknowledge the need for modernization in the sector (Hobcraft, 2012). Innovative technologies open the doors to creative applications within the education field (ED. Gov., n. d.). Owing to this, re- imaging of the traditional education system is indispensable. There are educational experts who hold on traditional values. If any change is implemented in the system, the impact will be felt by the students and will lead to improved efficiency in the learning process. Success as an Innovative Change In October 2009, Secretary Duncan announced that there will be a $650 million grant that will be directing towards funding of new promising ideas that are aimed at benefiting all students across the country (ED. Gov., n. d.). In March 29, 2010, the initiative had over 2850 members, 76 innovative ideas had been submitted and most of them have received positive response (ED. Gov., n. d.). In 2011, the budget for the Fiscal year 2011, President Obama and Secretary Duncan requested a $500 million grant to fund the ideas that did not get funding in the previous year (ED. Gov., n. d.). Additionally, an active network is operational and has received immense publicity over time. The Department of Education is motivated by the early success of this initiative. This investment represents the most significant investment that has been made to the Department of education to date. Yet, the department acknowledges that sustaining efficient innovation in the education sector requires more than successful grant completion but also how the innovation is implemented (ED. Gov., n. d.). It is clear successful implementation of innovative ideas in the education sector is affected by lack of a

Cultural Self-Assessment Assignment Example | Topics and Well Written Essays - 1250 words - 1

Cultural Self-Assessment - Assignment Example In this paper I will be looking at cultural self –awareness and the role it plays diversity competence. Every individual’s cultural background is very unique and important as it actually moulds our societal outlook. Various factors of cultural background come into play to influence the overall outcome of individuals in terms of cultural competence and outlook on society. The kind of setting out was brought up in is very influential in shaping their outlook on society. The environmental we grow up and live in, social-economic background, parental influence, culture and educational attainment are important factors within cultural background that roll into play to shape our outlook on society. Religion is another very important factor of cultural background shaping what we become in life as well as the outlook we take on society. The schools we go to, the neighbourhoods and the church we go to during childhood all influence what we became later in life. I personally was born and raised in Kuwait and indeed having left my home country to study abroad has actually taught me a lot in terms of cultural diversity. As a freshman in college I have to interact with fellow students from different parts of the world and a lot of cultural exchange takes place. I have learnt to appreciate the importance of cultural diversity and this is because I now realise that the world has a myriad of cultures and therefore expecting to live, work with or learn with just your own culture in the modern world is tantamount to cultural incompetence. Cultural competence training for me is therefore a very important aspect especially considering that I am a student in effect a future leader. Appreciating others, respecting their cultural identities, learning from them and embracing cultural diversity is what I want to achieve. I therefore value cultural competence and it is for the

Evaluation of natural composit materials in structures Essay

Evaluation of natural composit materials in structures - Essay Example 331). In relation to structures, natural composite materials have been employed in the formation of load-bearing elements. These include roofs, beams, multipurpose panels, pedestrian bridges and water tanks. Beams are vital components in bridges, buildings and other structures. In fact, beams are considered to be structural elements that are in flexural mode or bending. They may have rectangular or square cross section depending on the requirements of a structure or even the design. Beams are commonly made of reinforced concrete, timber, laminated veneer lumber or steel profiles. Research shows that recent developments of using natural composite beams lead to possible weight, cost, time and installation advantages. There is therefore an opportunity for the use of natural composites in the construction of structural beams. This opportunity can be also explored in construction of pedestrian bridge girders because they demand moderate design loads. The use of natural composite materials in beam construction is necessitated by the low cost and densities of natural fibres and their environmental benefits. Among the feasible concepts of natural composites is the composite sandwich beam. The composite sandwich beam incorporates the use of several layers of materials. More often than not, the same material is utilised for the slim bottom and top section and the compact core material located in between. The core is of lesser strength as compared to the material utilized for the bottom and top. Dweib et al. (2004, p. 150-151) have analysed and formulated sandwich beams which constitute cellulose fibres that are made from paper that is reused, foam core and Acrylated Epoxidized Soy-bean Oil (AESO) which has added strength. An I-shaped beam was another idea that was derived from the natural composite beam. Using the Vacuum Assisted Resin Transfer Molding technique, soybean oil based resin system and woven burlap (jute fabric) composite has been utilized in a successful man ner to produce an I-shaped beam (Alms, Yonko, McDowell and Advani, 2009, 83). According to Marsh (2000, p. 57), the primary design methods that are normally utilized in structural design are tensile stiffness, bending stiffness, bending strength and tensile strength [36]. For some applications like roof however, impact strength is as well crucial. For polyester which is strengthened by glass fibre to be utilized as roof materials it has to demonstrate a tensile strength that is not less than 50 MPa and have no hole or crazing or cracking visible after being tested. It also has to demonstrate SREC2010-F1-5 4 impact resistance of 1.96 J in Australian standard. Roof material needs to be designed in a manner that it supports all types of loads whether it is live load, dead load and at other instances snow load. Other features of the material are; it should be water resistant, lightweight, weather resistant (for instance ultraviolet light resistant) and fire resistant. Coming second to e lectricity, the roofing sector is the second largest user of glass fibre in the construction and building sector in Europe. In third rank, in terms of percentage, is the utilization of glass fibre for industrial infrastructure which includes tanks, pipes and corrosion

Write about your reactions to the final part of Hamlet Essay Example for Free

Write about your reactions to the final part of Hamlet Essay At the start of the play we see Hamlet returning to Denmark from university, as he has heard the news of his farther, Old-Hamlets death. He arrives home perhaps thinking that he shall now take the place as the king of Denmark, only to discover that while he was away Claudius, his uncle and Gertrude, his mother have been wed. Therefore Claudius, not Hamlet, takes the place as King of Denmark. When Hamlet discovers this he becomes almost deranged, especially when Old-Hamlet appears to him in a form of a ghost, revealing that Claudius killed Old-Hamlet. This knowledge forces him to feel betrayed by all around him, such as the politicians that once supported his father and now show that same respect to Claudius. He feels that he can not trust his mother or Ophelia, his girlfriend. When travelling actors arrive Hamlet decides to put on a play to draw Claudius out, by seeing if he would react to a play about a brother killing a king to steal the crown. Claudius rushes out when the play is acted, showing that he is responsible for the killing of old-Hamlet. Hamlet follows quickly behind him and is about to strike Claudius down when he hears him committing his acts to god. Hamlet decides not to kill him, as when old-Hamlet was killed he did not have to commit his sins to god, so he was stuck in purgatory, a place where what you have done is weighted up, in good and bad to decide what will happen to them. Instead of killing Claudius he then proceeds to his mother to tell her of what he has found, hearing a sound he turns and thrusts a sword into a curtain, thinking that it was Claudius, only to discover that it was Polonius, Ophelias father, whom then dies. Claudius decides to send Hamlet to England to be killed, only to have Hamlet foil his plan. Hamlet returns to find while he has gone Ophelia has gone mad and has drowned her self, grief stricken he leaps into her grave. Laertes, Ophelias brother and Poloniuss son then challenges Hamlet to a duel which he Hamlet accepts. Laertes is then approached by Claudius who offers to fix the fight by poisoning his foils tip, Laertes grief stricken accepts this offer to revenge the two deaths in his family. The Ending of Hamlet sees the deaths of Laertes, Claudius, Gertrude and most importantly Hamlet. We also witness a change in the character of Hamlet, as he is now thinking less and acting more. He even mocks Laertes: Ill be your foil Laertes, in my ignorance your skill shall like astar i th darkest night stick fiery off indeed. In this scene we as an audience feel the dramatic tension, as we know all the traps lay in front of Hamlet, the poisoned foil of Laertes, and the cold goblet of wine poured by Claudius. Yet you find your self thinking that perhaps Hamlet knows that something is going on when he asks: These foils have all a length This is to command the attention of the audience to the poison tip of Laertes foil, which within the duel is held of to prolong the dramatic tension. This is the same way Hamlets action is held of with his obsession with procrastinating about the action which is to be taken to revenge his fathers death. This scene is made more dramatic by the frequent use of trumpets and kettle drums. The use of musical instruments in this way makes the environment appear more exciting. Hamlet tries to explain his actions of his recent self by asking give me your pardon sir, for I have done you wrong, but goes on to say it was not Hamlet, was his madness and also admits that his madness is poor Hamlets enemy. This excuse is not accepted by Laertes for in his terms of honour I stand aloof the only reason he is going along with the duel is to keep his name ungored, and also to revenge his fathers and sisters deaths. The use of language is of a high-class because the word ungored reminds us of the poisoned tip of the foil and what Laertes planes to do with it. Before the duel can start, Claudius plans to drink to Hamlets better breath, this is ironic as Claudius has already planed to poison Hamlets goblet of wine with a pearl. Claudius refers to this as a union, which could refer to the way in which old-Hamlet and Hamlet are to be killed, as old-Hamlet was also killed with poison that Claudius gave him. Claudius also performs this task to show the people around him that he is supporting Hamlet, so he is not thought to be guilty of Hamlets death. After the king drinks to Hamlet there is another out burst of sound as the trumpets are blown, this is also to add to the already excited atmosphere to start the duel. This leaves the audience knowing more than the victim. The next part of the text is split a series of short sentences, this is to create the speed of the duel and how the points are awarded by touches. The style of writing is used to build the dramatic tension between the two competitors. As you see Hamlet gaining the hits over Laertes, and with one hit left you start to think that Hamlet has foiled Claudiuss plan, and even avoids the poisoned goblet on two accounts. Mean while Claudius shows in this scene that he is now completely taking the place of his brother, as he speaks aside to Gertrude our son shall win. This small sentence shows what a twisted man he really is, as the words our son show as Hamlet is his brothers son and Claudius is only his uncle. Furthermore this shows that he is comfortable that his plan to poison Hamlet will be successful. Claudius is therefore shocked when Gertrude takes up Hamlets goblet to drink to him, Claudius then shouts to Gertrude, Gertrude do not drink. This line is probably by best line as it creates an atmosphere within the hall, as Claudius is pulled between saving his wife and not letting the hall of people know that he has poisoned Hamlets goblet of Hamlets wine, but in the end he is out for himself, as he does not take the goblet away from Gertrude. At this same point I think Gertrude believes all the things that Hamlet has told her earlier in the play and feels so bad that she drinks the poison, in a way this makes up for the betrayal that she committed towards her family and also the memory of Old-Hamlet. Again Hamlet dare not drink from his goblet as he wants to finish the duel first. This saves him from the poisoned goblet, therefore he only has one problem before him and thats Laertes revenge. Before the third round is started Laertes strikes out violently and wounds Hamlet, therefore poisoning him, yet to do so is almost against his conscience. In the incense of the fight, as it is no longer an honourable duel, the foils are swapped and Laertes tastes his own venom, he is justly killed by his own treachery. The Queen mean while is laid out on the floor with Claudius attending to her; she then calls out the truth about the drink! I am poisoned. At this point Hamlet knows that some treachery is around and he calls for all the doors to be locked and to seek it out. This again changes the mood of the hall and creates a room full of panic, as people are screaming and talking in worried voices. Laertes is the first to commit that he has wronged, Hamlet, thou art slain and that the treacherous instrument is in thy hand. Laertes also names who the blame should rest upon the King, the Kings to blame. At this point in the Branna film Hamlet troughs the foil at Claudius and wounds him. This causes another wave of panic to throng through the witnesses. Claudiuss last thought is for himself O yet defend me friends. This makes Hamlet angry and starts to make Claudius drink the poisoned goblet while saying all the sins Claudius has committed, incestuous, murderous, damned Dane. Again union is used to link Claudiuss death to Gertrudes, as he is united with her in death. This could also refer to the way both the brothers were killed with poison. The anger of Hamlet changes the atmosphere into a mute. Laertes then exchanges forgiveness with Hamlet, as Laertes dies. Hamlet is also feeling the poison within him as he admits to Horatio I am dead. He next turns to the rest of the witnesses in the hall; this is a much more kingly way to die thinking of his country and giving blessing to Fortinbras as the next king. When Fortinbras arrives there is once again a burst of sound, but this is not to stir excitement, it is more to command respect. When he enters he is met with the dead bodies of the royal family. When Hamlet is taken away he is carried like a soldier to the stage, as Fortinbras believes that Hamlet would have been a mighty king. I think this ending to Hamlet is a fitting ending to the play as it contains a lot of dramatic tension and a lot of action. This ending also contains a lot of honour with every thing that was wrong being righted.

Relationship between Inflation and employment rates and GDP

Relationship between Inflation and employment rates and GDP INTRODUCTION 1.1 BACKGROUND Gross Domestic Product as an indicator of wealth and therefore quality of life has long been criticized (Mederly, P. and et al. 2003). Gross Domestic Product (GDP) is the value of total production of goods and services in a country over a specified period, typically a year. The gross domestic product (GDP) or gross domestic income (GDI) is a measure of a countrys overall economic output GDP can be determined in three ways, all of which should in principle give the same result. The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to peoples total expenditures in buying things. The income approach works on the principle that the incomes of the productive factor must be equal to the value of their product, and determines GDP by finding the sum of all producer s incomes (Bureau of Economic Analysis, U.S Department of Commerce, 2007). The most common approach to measure GDP is the expenditure method: GDP= private consumption + gross investment + government spending + (exports à ¢Ã‹â€ Ã¢â‚¬â„¢ imports) GDP = C + I + G + (X-M) (Equation 1.1) An event in 1975 that remind us the current GDP in our country where the Malaysian economy slumped into its great recession, with a GDP growth rate of only 0.8 percent, compared to 8.3 percent in 1974. This is one of the effects of increase in oil prices and then substantial price increase in 1973 were bought about mainly shortage of food and raw materials arising from bad weather and increased aggregate demand (Cheng, M.Y. and Tan,.H.B. 2002). According to the above circumstances occurred in 1975, the researcher has choosing one of variables that may relate with fluctuation of GDP which is inflation rate. Inflation means either an increase in the money supply or an increase in price levels. Generally, when we hear about inflation, we are hearing about a rise in prices compared to some benchmark. The study of the effects of inflation on economic growth continues to be an important and complex topic in economics. If inflation has real economic effects, then governments can influence economic performance through monetary policy (Risso, W.A and Carrera, E.J.S, 2009). Therefore, investigating how inflation affects economic growth pertains directly to the optimal design of monetary policy. Results from such studies are particularly important for economies. Besides the inflation, the researcher has considered total employment as one of the variable in the model since economic growth and employment are correlated between each others. The relationship between unemployment and GDP is called Okuns law. It is the association of a higher national economic output with the decrease in national unemployment. This is because in order to increase the economic output of a country, people will need to go back to work, thus lowering unemployment. In order to support the relationship exist between GDP and employment, the researcher has found out the issue supporting the theory that GDP and employment has a positive relationship between each others. According to Hassan, M.K.H. and et al. (2010), in the period of 1996 -1997, the manufacturing sector experienced a rapid growth producing the employment rate in the sector to grow at 7.7 percent per annum but later declining to negative 3.6 percent in 1998 due to the economic recession. In addition, in year 2000, the Malaysian manufacturing sector contributed 33.4% to gross domestic product (GDP), 85.2% to total export and 27.6% to total employment. 1.2 PROBLEM STATEMENT Inflation is a major source of economic instability because it weakens incentives for work and production, distorts the allocate efficiency of the market mechanism, erodes international competitiveness of the domestic industry, and reduces growth potential. According to study by Fischer and Modigliani (1980) suggested a negative and nonlinear relationship between the rate of inflation and economic growth through the new growth theory mechanism. Furthermore, inflation also damages economic growth by lowering domestic and foreign savings, reducing efficiency of resource allocation, and deteriorating the balance-of payments (Risso, W.A. and Carrera, E.J.S., 2009). According to Cheng, M.Y. and Tan, H.B. (2002), the economy has experienced episode of high (1973-1974, 1980-1981) and low (1985-1987) regimes of inflation, and was able to contain low and stable inflation during the high economy growth period of 1988-1996. The second problem statement that should be concerns since the employment can affect the economic growth and it is important variable to determine the quality of production for national output and next will influence the GDP of our country. For example, in the early 1990s, the unemployment rate increased for about a year following the end of the previous recession. Coming out of a recession, companies are thought to be reluctant to hire many more workers until they are convinced about the sustainability of a new economic recovery while people who had left the labor force during the recession return to seek to find jobs (Seyfried, W.). Therefore, the researcher conducts this research in order to examine the correlation exists between inflation rate and employment with GDP so that we can help the country to mitigate the problem occurs by supporting the governments policies to increase the countrys GDP. In addition, this research also useful since the results of the studies can be used in policys decision for resource allocation in order to accelerate economic growth. 1.3 OBJECTIVES The objectives of the study are to: 1.3.1 Analyze the relationship between Inflation Rate and Gross Domestic Product in terms of magnitude and direction. 1.3.2 Analyze the relationship between Total Employment and Gross Domestic Product in terms of magnitude and direction. 1.4 SIGNIFICANCE OF THE STUDY The significances of this study are as follow: 1.4.1 Researcher This study will help the researcher to complete their course requirement and will be as guidelines for their field of work in the future. The researcher can gain many experiences in order to complete this research. There are lot of weaknesses may be obtained and this will encourage the researcher to provide the better research in the future. Future researcher will know and more understanding about gross domestic product when conduct this research. It will give the knowledge to the researcher to identify the correlation exist between inflation rate and employment and it always make the researcher briefing to know deeply and applied the study. 1.4.2 Organization This study might help the organization in analyzing the countrys economic condition in order to prevent and reduce the risk during the inflation and know the effects of the crisis occurs to them. This study also may give some guidance to them to protect their company and industry itself. 1.4.3 Public This study can inform and gives some knowledge to the public the relationship between economic growth, inflation rate and employment. They also can make preparation to face the increasing in inflation rate and able to survive in that situation. 1.5 SCOPE OF THE STUDY The researcher chooses to conduct the research about GDP in Malaysia from 2000 until 2010 In this study, the researcher wants to determine the correlation exist between inflation rate and employment with GDP in Malaysia. It is important because as economic planners and forecasters used the GDP per capita in monitoring economic growth trend for time series. The collection of data of GDP, inflation rate and total employment were collected from Department Of Statistics Malaysia in quarterly basis. 1.6 THEORETICAL FRAMEWORK Figure 1.1: Theoretical Framework INFLATION RATE GROSS DOMESTIC PRODUCT EMPLOYMENT RATE RATE Independent variables Dependent Variable Figure 1.1 represents the dependent variable and independent variables in this study. The function of theoretical framework has been clarified by Sekaran, U. (2003) which is a conceptual model of how one theorizes or makes logical sense of the relationship among the several factors that have been identified as important to the problem. Figure above clearly discuss the correlation between Gross Domestic Product which is variable primary to the researcher while Inflation Rate and Employment act as independent variable which is influences the dependent variable. 1.7 HYPOTHESIS In classical test of significant, two kind of hypothesis are used. They are Null Hypothesis and Alternate Hypothesis. Hypothesis is a conjectural statement that describes the relationship among variable even negative or positive. Null hypothesis which is represent by H0 symbol to show that the relationship between independent and dependent variable is not exist. However alternate hypothesis is representing by H1 symbol to show that the relationship is existing between both dependent and independent variable. According to Sakaran (2004), a hypothesis defines as a logically conjectured relationship between two or more variables expressed in the form of testable statement. Relationship a conjectured on the basis on the network of associations established in the theoretical framework formulated for the research study. There are two hypotheses that can describes the correlation exists between dependent variable and independent variables. Therefore the hypothesis that can be tested as follows: Inflation and GDP H0: there is no significant relationship between inflation and GDP. H1: there is a significant relationship between inflation and GDP. Employment and GDP H0: there is no significant relationship between employment and GDP. H1: there is a significant relationship between employment and GDP. 1.8 LIMITATION / CONSTRAINTS The limitations / constraints are: 1.8.1 Time constraint The length of time is limited since the researcher does not have much time to make detailed research. The time provided only three months and the researcher need to divide time properly to complete the research because the process of collecting data is quite difficult. 1.8.2 Cost constraint The cost involves is quite high since as a student, the researcher only depend on the loan applied. Examples of cost involve in order completing this research such as cost of printing, cost of maintaining the laptop, cost of surfing the internet and etc. 1.8.3 Data constraint Since the researcher use the secondary data, the collection of data that have been publish are so limited and the related material are not very supporting the topic of research. 1.8.4 Lack of experience The researcher is less of experience in conducting the research therefore needs to refer the researchers advisor to process the data and learning the skill that needed as a good researcher. CHAPTER 2 LITERATURE REVIEW 2.1 DEPENDENT VARIABLE 2.1.1 GROSS DOMESTIC PRODUCT (GDP) Generally, according to Chan, W.W. and Lam, J.C. (2000), gross domestic product is a common measure of the economic well-being of a society. When government officials plan for the future, they consider the various economics sectors contributed to the gross domestic products. In the other study by Ivanov, S. and Webster, C. (2007), they use the growth of real GDP per capita gr as a measure of economic growth in line with other publications in the field (see Ivanov and Webster, 2007; Lopes et al., 2002; Plosser, 1992). The function of GDP also has been explained by Kosmidou, K. (2008) where gross domestic product (GDP) is among the most commonly used macroeconomic indicators, as it is a measure of total economic activity within an economy. The gross domestic product growth (GDPGR), calculated as the annual change of the GDP, is used as a measure of the macroeconomic conditions. The significance between GDP, foreign trade and foreign direct investment has been discussed by Liu Ying and Cui Riming (2008) where the economy is highlighted by the significant performance of both its economic growth and its foreign trade and foreign direct investment. Under this background, the correlation of foreign trade, foreign direct investments and economic growth in has become an important issue for academic research. Previous studies support that foreign trade and foreign direct investment have positive impacts on gross domestic product (GDP). In the study by Malul, M. and et al. (2008), the GDPpc is used mainly to compare the standard of living in different countries. It means that the higher of cost of living in a country, the higher earning of gross domestic product of the country. According to Wong, K.Y.(2008),economic growth of an economy refers to the expansion of its production possibility set, as a result of accumulation of primary factors such as labor and capital (physical and human), or improvement of production technologies. However, because the production possibility frontier (PPF) of an economy is not observable, economic growth is usually measured in terms of the growth rate of some observable variables such as real GDP or real per capita GDP. Besides that GDP also one of the result of the countrys economic activities based on the statement of Daly and Cobb (1989), GDP expresses the content of physical flows of capital, industrial production, services, resources and agricultural product. The scientific research has been conducted by Ligon and Sadoulet (2007) using a sample of 42 countries show that GDP growth, which comes from agriculture is at least twice as effective in reducing poverty compared to GDP growth coming from nonagricultural areas. In order to know the correlation between inflation and growth, Gokal, V. and Hanif, S. (2004), stated that the tests revealed that a weak negative correlation exists between inflation and growth, while the change in output gap bears significant bearing. The causality between the two variables ran one-way from GDP growth to inflation. While, according to some consensus exists, suggesting that macroeconomic stability, specifically defined as low inflation, is positively related to ec onomic growth. 2.2 INDEPENDENT VARIABLES 2.2.1 INFLATION RATE (INF) Inflation on economic growth continues to be an important and complex topic in economics. If inflation has real economic effects, then governments can influence economic performance through monetary policy. Therefore, investigating how inflation affects economic growth pertains directly to the optimal design of monetary policy. According to Andres and Hernando (1999), for example, reducing inflation by one percentage point when the rate is 20 percent which results in an increase in the growth rate of 0.5 percent, compared to reducing inflation by one percentage point when the inflation rate is around 5 percent, which results in a decrease in the growth rate by 1 percent. Furthermore, a study by Mallik and Chowdhury (2001), the structuralisms argue that inflation is necessary for economic growth, whereas the monetarists argue the opposite, that is, inflation is detrimental to economic growth such debate started in the 1950s, focused on developing countries, which had long suffered fro m low-growth rates with high rates of inflation and larger deficits in the balance of payments. In order of inflation, the monetarists argue that price stability promotes economic growth and protects the balance of payments. They argue that inflation is major sources of economic instability because it weakens incentives for work and production, distorts the allocative efficiency of the market mechanism, erodes international competitiveness of the domestic industry, and reduces growth potential. They also argued that inflation damages economic growth by lowering domestic and foreign savings, reducing efficiency of resource allocation, and deteriorating the balance-of-payments. To monetarists, stable prices are the starting point in the process of economic development. The policy choice of a country would be stabilization with growth, or stabilization without growth. Several papers are typical of the monetarist tradition. To argue that, according to Fischer and Modigliani (1980) suggested a negative and nonlinear relationship between the rate of inflation and economic growth through the new growth theory mechanism proposed a model where the agents decide the level of labor output, and an increase in inflation reduces labor supply, and producing a decrease in economic production. On the other hand, a study by Mundell and Tobin (1965), the structuralizes argue that inflation normally accompanies economic growth in developing countries because structural rigidities and bottlenecks in supply sectors prevent the elastic supply of some basic commodities such as food, housing, energy, and transportation. Increased income as a result of growth would expand demand for such basic commodities, and prices would rise. The structuralize position is that economic difficulties in developing countries have roots deeper than just the results of inflation. Thus, structuralizes thought that inflationary pressures and det erioration in the balance of payments inevitably are attendant matters of economic growth. In developing countries, there thus would be a trade-off relationship between economic growth and inflation and an attendant deterioration in balance of payments. If a developing country wants stabilization of prices and balance of payments, it must reduce the speed of economic growth, including a sacrifice of employment. Among scholars who support the structuralize position on a positive relationship between inflation and economic performance, predict a positive relationship between the rate of inflation and the rate of capital accumulation, which in turn implies a positive relationship to the rate of economic growth. But, DeGregorio (1996) and Fischer (1926) pointed out, since money and capital are substitutable, an increase in the rate of inflation increases capital accumulation by shifts in portfolios from money to capital and thereby stimulate a higher rate of economic growth was the first to establish a negative correlation between inflation and unemployment. According to Grier and Grier (2006), it presents evidence on the real effects of inflation and inflation uncertainty on output growth. Their main findings are as follows: Inflation uncertainty has a negative and significant effect on growth Once the effect of inflation uncertainty is accounted for, lagged inflation does not have a direct negative effect on output growth; and As predicted higher average inflation raises inflation uncertainty, and the overall net effect of average inflation on output growth. Differ with theory of Bortis, H. (2004), he argues that inflation is a macroeconomic phenomenon represented by a gap between global supply and global demand. Inflation affects the money-output relationship, as does deflation; both phenomena modify the purchasing power of money over domestic output. In this view, price indices cannot come to grips with the inflation phenomenon. While Cheng and Tan (2002) in their study inflation in Malaysia, suggested that main factors affecting Malaysian inflation were external (foreign trade, foreign direct investment and technology transfer). Malaysia has been comparatively successful in balancing strong economic growth with moderate levels of inflation in the periods preceding and following the Asian Financial crisis. Actually, empirical results related to low and medium inflation are of a mixed nature; some papers (mainly these analysing the developed economies) argues that moderate inflation negatively affects growth (e.g. Alexander, 1997, Gillm an et al. 2002; Gillman and Harris 2009; Gillman et al. 2001; Fischer 1993; De Gregorio 1992 and 1993) while other argues that moderate inflation is actually stimulating growth. On the theory side Friedman (1977) in his Nobel lecture argues that a positive relationship between the level of inflation and inflation uncertainty. Friedman points out higher inflation leading to greater uncertainty, which lowers welfare and efficiency of output growth. On the other hand, Ball (1992) formalizes Friedmans hypothesis using an asymmetric information game where public faces uncertainty regarding the type of policymaker in the office. One of the policymaker is willing to tolerate a recession to reduce inflation and the other is not. During the low inflation time, both type of policymakers will attempt and try to keep it low. But, when inflation is high, only the tough type or anti-inflation policymaker will bear the economic costs of disinflation. The argument that central banks should emphasize holding down inflation comes from the beliefs that inflation has an adverse effect on macroeconomic variables, such as output and productivity growth. According to Clark (1982), inflation causes misperception of the relative price levels and leads to inefficient investment plans and therefore affects productivity inversely. Furthermore, inflation erodes tax reductions for depreciation and raises the rental price of capital, which in turn causes a reduction in capital accumulation and therefore in labour productivity. In addition, according to Feldstein (1982) inflation disrupts investment plans by imposing a higher tax rate on corporate profits and through higher effective tax rates on corporate income and accordingly affects productivity (Gilson, 1984; Boskin et al., 1980). Finally, inflation distorts price signals and reduces the ability of economic agents to operate efficiently (Smyth, 1995). According to Chen and et al. (1991), it has documented a significant relationship between the US stock returns and real economic variables such as industrial production, real GNP, interest rates, inflation and money supply. Besides that, there are also otherwise arguments that there is no relation between inflation rate and gross domestic product in the long run. For instance, Faria and Carneiro (2001) investigate the relationship between inflation and output in the context of an economy facing persistent high inflation and they find that inflation does not affect real output in the long run, but that in the short-run inflation negatively affects output. In addition, scholars such as Sidrauski (1967) suggest that there is no relationship between inflation and economic growth, supporting the hypothesis of super neutrality of money. On the other hand, Sarel (1995) asserts that there is a nonlinear relationship between inflation and economic growth. Using 87 countries, he finds the existence of an inflation threshold of 8 percent. Above the threshold there is a negative relationship between inflation and economic growth, whereas under the threshold there is a positive but not significant relationship. The others studies in order to prove Sarels result, Judson and Orphanides (1996) divide Sarels sample of countries into three groups, and they find similar results to Sarel, finding a threshold of 10 percent. Ghosh and Phillips (1998a, b) study 145 countries in the period 1960-1990 again finding similar results. Paul et al. (1997) study 70 countries (of which 48 are developing economies) for the period 1960-1989. They find no causal relationship between inflation and economic growth in 40 percent of the countries, bidirectional causality among 20 percent of the countries, and unidirectional causality for the rest (either inflation to growth or vice versa). Lastly, Mendoza (1998) finds that inflation has had no effect on Mexicos long-run economic growth since he conducted the study of inflation in Mexico. 2.2.2 EMPLOYMENT Some of studies have been conducted to examine the relationship between gross domestic product and employment. For instance, according to Okun (1962) and Philips (1958), they found different relationship both of these. Okun found a negative correlation between unemployment and economic growth, then from both propositions it can be deduced a positive relationship between economic growth and inflation while Phillips proposed a positive relationship between inflation and unemployment implying the same type of relationship. In addition, Boltho and Glyn (1995) found elasticities of employment with respect to output growth in the order of 0.5 to 0.6 for a set of OECD countries. While according to Evangelista and Perani (1996) discovered evidence suggesting that restructuring of major economic sectors reduce the relationship between economic growth and employment. A specific research conducted by Seyfried, W., among the G7 countries (Canada was excluded), a positive and significant relationship between growth in value added and employment was found only in Germany and the US. In addition, according to Verdoon (1949) and Kaldor (1966), an increase in output growth of 1 percent leads to an increase in productivity and employment growth of half a percentage point each. It should be noted that the higher the productivity effects of growth, the more difficult it will be to keep unemployment from rising. According to Okuns Law an increase of the economic growth rate by 3 percent (above the normal rate) was expected to reduce the unemployment rate by 161 percentage point. Or, to put it the other way round: The gain of real GDP associated with a reduction in unemployment of one percentage point was estimated to be 3 percent. Several studies also have been conducted to examine the correlation exists between employment and inflation rate. One of the studies by Spithoven, A.H.G.M. (1995), by the end of the 1960s evidently there was no fixed relationship between unemployment and inflation. Empirical research revealed that the relationship was not consistent over time and varied sharply between countries. This was explained as follows: in the short run higher nominal wages attract more labour and engender a fall in the rates of unemployment. As soon as the workers recognize the wage rise to be purely nominal they abstain from work, and unemployment is restored to the pre-wage-rise level, but with a level of prices higher than before. Secondly, according to Brenner (1991), confronted with a combination of unemployment and inflation (stagflation), many governments abandoned efforts to regulate the economy by the Keynesian instruments. They declared fiscal policies ineffective and sought refuge in a mixture of m onetary measures with supply-side economics. According to Keynes (1946), the volume of employment is given by the point of intersection between the aggregate demand function and the aggregate supply function. This was naively interpreted and construed to imply that a rise in costs and with this was meant a rise in costs owing to increasing government expenditure will result in an upward shift of the supply curve and will cause greater unemployment and inflation. CHAPTER 3 RESEARCH METHODOLOGY AND DESIGN 3.1 MODEL SPECIFICATION This study is to examine the correlation exists between inflation rate and total employment with gross domestic product. It uses secondary data which is based on time series data. The collection of time series data from 1982 to 2006 and the scope is in Malaysia. The researcher applied STATA software to process the data and log-log model in this study. The model applied a log transformation, since log transformations help, at least partially, to eliminate the strong asymmetry in the distribution of inflation (Sarel, 1995) and (Ghosh and Phillips, 1998a, b). The logarithm equation is written in the Equation 3.1. GDP = ÃŽÂ ± + ÃŽÂ ²1In(INF) + ÃŽÂ ²2ln(EMP) + ÃŽÂ µ (Equation 3.1) Where, GDP = Gross Domestic Product ÃŽÂ ± = Constant ÃŽÂ ²1 = Inflation ÃŽÂ ²2 = Employment ÃŽÂ µ = Error term In above equation, it shows clearly dependent variable that has been applied in this study is gross domestic product, besides that, the researcher also used two independent variables which are quantitative variables, they are inflation rate and total employment. 3.1.1 DEPENDENT VARIABLE The dependent variable is the variable of primary interest to the researcher. The researchers goal is to understand and describe the dependent variable, and to explain its variability, or predict it (Sekaran, 2006). Dependent variable of this study is factor contributed to the gross domestic product. According to Zikmund (2000), independent variable is a criterion that predicted or explained. It show that the component contributed to improving of gross domestic product depend on the listed independent variables. 3.1.2 INDEPENDENT VARIABLES According to Zikmund (2000), independent variables that expected to influence the dependent variable. Refer to (Burn and Bush, 2000), independent variables are those variables over which the researcher has some control and wishes to manipulate. In this study, two independent variables will influence the dependent variables. They are inflation rate and employment. 3.2 DATA SET AND METHODOLOGY The collections of data in this research only gain from secondary data and based on time series data which are from 2000 to 2010. The researcher has considered annual data of real GDP, inflation rate and employment. All the data on the growth rate of real GDP, Inflation and total employment were obtained from Department of Statistics Malaysia database. GDP is considered per capita. In addition, according to Aigenger (2005) per capita real GDP is also used as an alternative measure of productivity, as some theoretical models do. Moreover, according to OECD (2001), living standards as represented by per capita income reflects productivity since the former is determined, to a significant extent, by the latter. CPI consider in weight 100 while employment in number of labor. The variables were selected based on relevant economic theories that allow for the interaction among inflation rate and total employment in addition to response to GDP. 3.3 TECHNIQUE ANALYSIS DATA In this research, the researcher has applied unit SPSS in order to determine time series data is stationary or non stationary about the correlation between inflation rate and employment with gross domestic product. The researcher examines the existence of a long-run relationship between inflation and employment with GDP using a vector error-correction model (VECM) after applying Johansens (1988, 1990, and 1995) cointegration technique. We conduct a test for weak exogeneity in order to do inference. Then, the researcher conduct stability test by using Jarque Bera test in order to test normality distribution between the variables selected. Finally, a modified version of the Granger causality test is applied in order to analyze causality between the variables. 3.4.1.1 Multiple Regression Analysis Multiple Linear regression analysis is an analysis of the relationship between one variable (dependent variable) and set of variable (independent variables). It is used by the researcher to test the hypothesis. As in all hypothesis tests, the goal is to reject the null hypothesis and accept the alternative hypothesis. This technique will identify how much of the variance in the dependent variables can be explained by independent variables. This analysis is used primarily for the purpose of pre

Unemployment as an Indicator of Macroeconomic Performance

Unemployment as an Indicator of Macroeconomic Performance The rate of unemployment is one of the most important indicators of macroeconomic performance. Unemployment arises due to the distortions in the supply of labor cause by the non-competitive wage differential. During the period from 1945 until at least 1968, unemployment rates in the major European economies were extremely low by todays standards. For instance in the United Kingdom, the average rate of unemployment for the entire period was about 1.8% of the labor force and in worst years it did not even exceed 2.5%. The main driving force was autonomous rather than policy related. These forces include waves of new products and processes, spread of trade and development around the world. However the cause of unemployment problem in Europe in comparison to the United States was their labor market institutions while the United States is far more superior due to the flexibility of their labor market. In this paper, determinants of unemployment in US are the concerns with economic growth as the main concern. Economic growth of a nation is the increase in a nations real output that occurs over time. In general, growth and unemployment are closely related as unemployment affects the growth rate through the scale of operation of an economy. Besides that, FDI inflow and inflation are taken into account altogether to identify the relationship towards the unemployment rate. 1.1 Background As unemployment is one of the most important economic indicators, the unemployment rate provides useful information such as how the labor market works as well as the percentage of human capital that is not used in the production process, which is especially crucial towards policy makers. Consequently, it is important to analyze the factors that impact the unemployment rate regardless short or long term perspective. The United States of America is a developed country which has one of the largest population and production in the world (Encyclopedia, 2010). As unemployment are explained by structural factors mainly by inflexible labor market. One may wonder the about the impact which economic growth, inflation and FDI have on the unemployment rate of the United States of America as the clutches of unemployment are hard to escape even for a develop country, especially for US which possesses by far the most flexible labor market. As a case study, the United States of America has been chosen as the research country. United States of America is reckoned to be particularly appropriate as United States of America labor market has proven by all accounts to be more dynamic in the sense of a higher level of job turnover, resulting in high vacancy levels at any point in time. Recently, unemployment rate in the United States of America has been found to be as high as 9.6% as of August 2010 compared to the 4. 1% ten years ago (Bureau of Labor Statistics, 2010). In the mean time the real GDP growth in 2000 was at 4.14% when the unemployment rate was 4.1% while the real GDP growth in 2003 was at 2.49% when the unemployment rate was 5.8% (Bureau of Labor Statistics, 2010). From here, it can be seen that unemployment rate moves in the opposite direction of economic growth, yet there were different versions of results concluded by different previous researchers. 1.2 Problem Statement Unemployment has been a famous macroeconomic variable that researchers tend to use to study on but even with so many researches carried out, some of the results obtained are not consistent with one and another. For instance, the debates among Monetarist and Keynesian views of unemployment as well as the new contributions of Lucass approach and new Keynesian Economics shows that there was no reason to account for growth in the unemployment model. However, a significant innovation occurred with Pissarides'(1990) formulation of an unemployment theory in equilibrium. In many previous attempts, he formalize a unique framework to study the labor market dynamic perspective, providing useful tools to analyze both long and short run unemployment. Pissarides also introduced a first link between long run unemployment and growth which matches the neoclassical framework of economic growth. ( Pissarides, 1990 Ch. II) In the case of US, its economy began its current economic recovery in December 2001. However, rather than experiencing employment growth, not only did the unemployment rate increase but the number of new jobs created in the economy actually declined significantly during the first year of the recovery (Seyfried). Thus this paper is conducted so as to affirm the relationship of economic growth has on the unemployment rate of the country. As some results obtained by past researchers showed that economic growth impacts unemployment whereas the others came to a conclusion that unemployment causes economic growth whereby the existence of Granger Causality relationship is quite possible. In this study, economic growth, inflation and FDI serves as explanatory variable to determine the relationship towards unemployment rate in the United States of America. 1.3 Objectives This study aims to investigate the determinants of unemployment rate in the United States of America with economic growth as the main concern in addition with inflation and FDI (foreign direct investment) to further assure that it is coherent with the results obtained from previous studies. 1.3.1 Specific objectives This paper aims to examine the relationship between economic growth, inflation and FDI towards the unemployment rate. On the other hand, this paper serves to probe further into the relationship between economic growth, FDI, and inflation towards unemployment to sustain the existence of granger causality relationship. 1.4 Significance of study The contribution of carrying out this study is to allow policy makers to have an insight of unemployment so as to allow them to decide on suitable policy that will help bring down the unemployment rate while sustaining appropriate inflation level and attract sufficient FDI inflow. The results generated will help provide insight to the nature of the relationship between economic growth, inflation, and FDI towards unemployment. It would be useful to policy makers to know the rate and relationship of economic growth as it is necessary to reduce the unemployment rate, or at least keeping it from rising. Moreover, in previous studies, FDI is found to have impacted the unemployment rate indirectly through spillover effects from economic growth. In this study, however, FDI is incorporated directly to affect unemployment growth; therefore the effectiveness of the implemented policy will be taken into account more effectively. CHAPTER 2: Literature Review 2.1 Conceptual Model According to Alexopolous (2003), in the case where there is technological growth in the economy, families will increase their investment in capital, which in turn increase the amount of family purchased consumption workers receive over time. As a result, firms optimally increase the wage rate proportionately in order to prevent workers from shirking on the job. Therefore, the rate of unemployment along the balanced growth path will not change over time, since the marginal product of labour and the marginal cost of labour grow at the same rate. Based on De Groot, in general, growth and unemployment are intimately related for two reasons. Unemployment affects the scale of operation of the economy and thereby the growth rate. Growth affects inter-temporal decisions of workers about where to allocate on the labor market once they are laid off, and thereby it affects equilibrium unemployment. According to Brecher (2007), rapid economic growth and FDI, accompanied by higher per capita income, usually increase output growth. Thus, domestic firms and foreign multinational corporations will demand more labour force with skills to create products. Hence, economic growth can promote future employment growth for labour force based on new Keynesian theory of the output-inflation tradeoff. Some studies found that overseas investment replaced domestic employment in developing countries; however, the same result did not happen in developed countries. Tremblay (2007) pointed out that based on classical economic theory, the Phillips Curve illustrated long-run tradeoff between unemployment and inflation. There is an inverse relationship between inflation and unemployment, that is saying inflation will rise when unemployment decrease and vice-versa. Futhermore, Luciano Fanti and Piero Manfredi (2003) mention that the neoclassical Solow model, which still provides excellent econometric fits and shows a globally stable positive growth equilibrium, but also shows two restrictive features as regards the scope of this paper: (1) it does not take into account the stylized fact of the existence of unemployment, which is generally not only positive but also strongly fluctuating; (2) in such a model fluctuations have never been endogenously determined Meanwhile, Martin Zagler (2006) noticed that the cost associated with economic growth is structural unemployment, as structural change destroys jobs in one firm and creates jobs in another. The source of unemployment is the rate of intra-sector structural change associated with faster economic growth. Besides, Bonatti (2007) says that an increase of the workers influence on the political process may raise the fraction of GDP allocated to finance the welfare state, thus leading to a higher unemployment rate and to a lower growth rate. The research work done by Chang (2007) noticed that when the degree of trade openness of Taiwan is larger, the unemployment rate of Taiwan will increase, this is because the young men and young women in Taiwan desire to extend their education in working age. According to Phillips (1998), the negative relationship between inflation and unemployment can be explained through governments expansionary policy to increase the consumption level of the citizens. As labor market tightens, unemployment rate will fall as money wages tended to rise more rapidly. Unemployment will then increase as government tries to control the inflation rate. This is because the increment in wages is closely related with the increase in price. Therefore, the trade-off between these two variables can be seen. 2.2 Methodology Effects panel regression methods were used by Zagler (2006) on the relationship between economic growth and unemployment. Moreover, Zagler (2006) checked his estimated model with the unit-root test to test the stationary of the model. In order to obtain information about the relationship between inflation and unemployment, the procedure of den Hann was employed by Bae (2006), which has the advantage as no assumptions about the order of integration in the variables of interest is required. The procedure estimates a vector regressions (VAR) model and analyzes the correlations of VAR forecast errors of inflation and unemployment at long horizons. Chang (2007) used vector autoregression method of variance decomposition and impulse response function analysis are applied to analyze various relationships among foreign direct investment (FDI), economic growth, unemployment and degree of openness in Taiwan. Besides that, he also uses the unit root test of augmented Dickey-Fuller (ADF and KPSS) test to examine the stationary properties of the economic time series. The appropriate lag-length in the ADF regression is selected by minimizing the Akaikes information criterion (AIC). He also uses co-integration test to determine whether there exists a long-run equilibrium relationship among variables and weak exogeneity, and multivariate Granger-causality test to determine their causal direction in the short-run between all variables. Besides, he also has applied the VAR technique of variance decomposition and impulse response function analysis to analyze various inter-relationships between FDI, unemployment rate and GDP variables in the case of Taiwan from the period of 1981 to 2003. Meanwhile, Eric Heyer, FrÃÆ' ©dÃÆ' ©ric ReynÃÆ' ¨s, Henri Sterdyniak (2006) present the results of the DF-GLS unit root test to test the growth rate of consumer price and also unemployment rate. 2.3 Empirical Result Zagler (2006) has carried out a research which empirically investigated the link between economic growth and unemployment, using micro econometric evidence for the United Kingdom. The results generated showed a significant and negative relationship between unemployment and economic growth. According to the result generated by Muscatelli and Tirelli (2001), it is proven that there is a negative relationship between economic growth and unemployment as Japan, Germany, Italy, France and Canada. This result is generally in favour of those theories which predict a negative linkage between unemployment on economioc growth Besides, Pehkonen (2000) stated that a fall in GDP has significant relationship with unemployment as a drop in the GDP in Finland leads to an increase in the unemployment since demand for labor have shrunk. Therefore, Pehkonen (2000) concluded that unemployment would increase as a result of a decrease in economic growth. Meanwhile, Mitra and Sato (2007) found that the major links between external scale economies and growth are perceived in terms of technical efficiency, and higher growth is taken to reduce the unemployment rate. Futhermore, Scahaik and Groot (1998) found that the unemployment and economic growth relationship in imperfect competition economy and different periods, where structural changes occur, has a negative correlation and effect of different degrees through testing the structural stability. Chang (2007) proved that economic growth as well as FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. In addition, according to Solows growth theory, employment for labour force with skill can further promote economic growth and this can be verified by Taiwans economy model. Okuns law stating that reducing unemployment for labour force can promote further economic growth is then verified. Furthermore, unemployment is very sensitive to changes in GDP and vice versa, which does lend support that rising economic growth can obviously affect unemployment for labour force. shock of unemployment rate has negative effect on economic growth . He also mentions that the shocks in economic growth and FDI inflow decrease the unemployment rate. This means that rapid economic growth and FDI inflow, accompanied by higher per capita income can promote future employment growth for labour force. In the research study of Meckl (2001), correlation between growth and unemployment is shown to be positive if the research sector is of the high-wage sector in the economy, and negative if the research sector is the low-wage sector. Arico (2003) has already observed that the rate of growth is negatively related with the rate of unemployment. If the growth rate increases, it will decrease the net rate at which the stream of profits is discounted. For each firm the entry will result less costly. More vacancies will be created, reducing the unemployment rate. (Capitalization effect).On the other hands, It will reduce the life-time of each firm, by increasing the price for human capital. Each innovation will generate fewer vacancies than before. That will be reflected in an increase of the rate of unemployment. (Indirect creative destruction effect). Besides, Fanti and Manfredi (2003) has shown a negative relation between unemployment and growth , though we should also mention the positive relation between unemployment and growth obtained in the particular creative disruption context according to Schumpeters idea. Fanti and Manfredi alsomshows a surprising relation between unemployment and growth (via effects on population which is an endogenous engine of growth): this relation can be either positive or negative depending on the relative levels of cost of childrearing of workers and unemployed persons and the level of unemployment benefits. Meanwhile, Bonatti (2007) noticed that reduction of government transfers in favor of the workers allows decreasing the ratio of total tax revenues to GDP, thus monotonically increasing the growth rate and leading to a lower unemployment rate. CHAPTER 3: RESEARCH METHOD 3.1 Data Analysis 3.1.1 Unemployment Rate In this study, unemployment rate is the main study which was examine by using some explanatory variables. According to BLS, Bureau of Labor Statistics, (2009) those people who are with jobs can be considered as employed. On the other hand, a person will be classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Dixon Shepherd (2002) stated that the unemployment rate can be considered as one of the most important indicators of macroeconomic performance in a country. The data of unemployment rate is obtained from the Bureau of Labor Statistics (BLS) which if measured in percentage from those people who are 16 years old and above from year 1970 to 2007. The method which BLS used to calculate the unemployment rate in United States is: X 100% 3.1.2 Real Gross Domestic Product Real gross domestic product (Real GDP) in a country can be measured by the total output value of goods and services which produced from the domestic labor in the country in a given year, expressed in base-year prices. In this study, it is expected that there is a negative relationship between the Real GDP and unemployment rate in United States. The source of the United States Real GDP data is from the World Bank World Development Indicators and International Financial Statistics of the IMF. On the other hand, the data obtained was converted to a 2005 base year. The formula to calculate the data of United States Real GDP is as below: 3.1.3 Foreign Direct Investment Foreign direct investment (FDI) is a kind of investment which is made to serve the business interest of the investor in a company which is in a different nation distinct from the investors country of origin. An example of FDI is a foreign company comes into a country to build or buy a factory and run a business there. Many economists believe that FDI is good for an economy, because it provides domestic job opportunities and increase domestic capital. In this study, net inflows of foreign direct investment in the measurement of current US Dollar are used. A net inflow of foreign direct investment is the total amount or value of the investment flow into United States from foreign investors to operate their business in United States and negative relationship between foreign direct investment and unemployment rate is expected in United States. 3.1.4 Consumer Price Index Consumer price index (CPI) is measured that examines the weighted average of prices of a basket of consumer goods and services in a country, such as transportation, food, rental fees and utilities fees. CPI is one of the measurements of inflation rate. According to Bureau of Labor Statistics (BLS), the prices for the goods and services used to calculate the CPI are collected in 87 urban areas in United States from about 23,000 retail and services establishments. The CPI data used in this study included all consumer items in United States from year 1970 to 2007. 3.2 Research Framework 3.2.1 Unemployment rate and Real Gross Domestic Product Based on the study, unemployment and real gross domestic product is expected to be negatively related. Edward (2007) stated there is a negative relationship between real gross domestic product and unemployment because of the theory of Okuns law. According to Okuns law, 1% increase in the unemployment rate will decrease GDP by 3%. However, Christopher (2010) said that, Okun coefficients can change over time because the relationship of unemployment to output growth depends on laws, technology, preferences, social customs, and demographics. 3.2.2 Unemployment and Consumer Price Index Consumer price index is one of the most frequently used statistics for identifying periods of inflation or deflation. This is because large rises in CPI during a short period of time typically denote periods of inflation. Therefore, we expect that there is an inverse relationship between the rate of unemployment and rate of inflation. According to the Phillips Curve theory, if the unemployment is high, inflation tends to be low. The diagram below shows the Phillips curve. Inflation Phillips curve Unemployment However, the result shows a positive relationship in our regression model. This problem will occur because of the multicolinearity problem in our regression model. But when one independent variable by one independent variable with the unemployment is tested, negative sign for consumer price index and unemployment are obtained. Bae (2006) stated that there is a positive long run relationship between unemployment and inflation. 3.2.3 Unemployment and Foreign Direct Investment In this study, inflow of foreign direct investment were expected to affect the unemployment rate significantly and expected that foreign direct investment has a negative long run relationship with unemployment. Foreign direct investment will increase job opportunities so, unemployment rate will decrease. Shu (2007) stated that FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. 3.3 Econometric Methodology 3.3.1 Introduction This chapter consist the used of the method to examining the relationship between the unemployment and economic condition in United State by using the time series data ranging from the year 1970 to 2007. First, the result testing will start with the test of stationary by using Augmented Dickey-Fuller unit root test and proceed with the cointegration test. Secondly, the Multiple Regression Analysis and several ways to detect the assumption of the Classical Linear Regression Model (CLRM). The multicollinearity is used to test the correlation analysis. Breusch-Godfrey Serial Correlation LM Test is used to test the existence of serial autocorrelation, Autoregression Conditional Heteroscedasticity Test is used for testing the heteroscedasticity variance of error of the model and Ramsey RESET Test is used to detect the linearity regression and misspecification error. Unemployment = f (RGDP, FDI, CPI) RGDP = Real Gross Domestic Product FDI = Foreign Direct Investment CPI = Consumer Price Index The change in unemployment is our main study that we want to examine with using a few of variables which are RGDP (Real Gross Domestic Product), FDI (Foreign Direct Investment) and CPI (Consumer Price Index). y = ÃŽÂ ²0 + ÃŽÂ ²1Ln (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3 (FDI) + Econometric Model with Expected Sign: = ÃŽÂ ²0 + ÃŽÂ ²1L (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3(FDI) (-ve) (-ve) (-ve) Where +ve indicates that there is a postive relationship between the explanatory variable and dependent variable. On the other hand, -ve indicates that there is a negative relationship between the explanatory variable and dependent variable 3.3.2 Unit root A unit root test is used to examine whether a time series variable is stationary. In the model, T-statistic, F-statistic and R-squared are used to determine to ensure the validity of the test statistics is stationary. The result will become spurious regression problem if the non-stationary series in the ordinary least square (OLS) regression is used. Spurious regression result in high significant T-statistic and highly value for the coefficient of determination R-squared, and the R-square is larger than Durbin Watson. Therefore, if the stationary does not hold, estimate is not consistent and result will be misleading. To avoid the spurious regression problem, the Augmented Dickey-Fuller test (ADF) is used to examine the stationary of the variable. An Augmented Dickey-Fuller test (ADF) is used to test for a unit root in a time series sample. The Augmented Dickey-Fuller (ADF) statistic used in the test is a negative number. Therefore, the more negative value is, more power the rejection of the hypothesis that there is a unit root at some level of confidence. The equation for Augmented Dickey-Fuller (ADF) test Where ÃŽÂ ± is a constant, ÃŽÂ ² is the coefficient on a time trend and p is the lag order of the autoregressive process. ÃŽÂ ± = 0 and ÃŽÂ ² = 0 corresponds to modeling a random walk and ÃŽÂ ² = 0 corresponds to modeling a random walk drift. By including lags of the order p, the ADF formulation allows for higher-order autoregressive processes. This means that the lag length p needs to be determined when applying in the test. One possible approach is to test from high orders and examine the t-value on coefficients. The criterion such as the Akaike information criterion (AIC), Schwarz-Bayesian information criterion (SBIC) or the Hannan-Quinn information criterion (HQIC) test is used to examine the lag length. 3.3.3 Granger Causality The Granger Causality test indicates that a time series Y is said to be Granger caused by X if X helps the prediction of Y or equivalently if the coefficients on the lagged X are statistically significant. Granger Causality shows two-way causation in the case. X Granger causes Y and Y Granger causes X. It usually through a series of t-tests and F-tests on lagged values of X and lagged values of Y. 3.3.4 Multiple Regressions The ordinary least squares (OLS) or linear least squares are a method to examine the unknown parameters in a linear regression model. It is used to assume the distribance, ui. According to Gujarati (2003), ui stands for the normal distribution representing zero mean and constant variance, à Ã†â€™2 in the multiple regression models. With the normality assumption, OLS estimators 1, and 2 are linear functions of ui. Therefore, if ui are normally distributed, so 1,and 2 will make hypothesis testing more straightforward. OLS estimators of the partial regression coefficients are identical with the maximum likelihood (ML) estimators. There are the best linear unbiased estimators (BLUE). Besides, the least-square estimators are best unbiased estimators (BUE); it means that they have minimum variance in the entire class of unbiased estimators. 3.3.5 Multicollinearity Multicollinearity shows the two or more independent variables in a multiple regression model are highly linearly related. The multicollinearity test is perfect if the correlation between two independent variables is equal to 1 or -1. Multicollinearity will occur when there is a strong linear relationship among two or more independent variables. The equation below is refer the variables is perfectly multicollinear if there exist one or more exact linear relationships among some of the variables. Estimates for the parameters of the multiple regression equation is The ordinary least squares estimates include inverting the matrix XTX where, It indicate that if the linear relationship (perfect multicollinearity) is exactly with the independent variables, the rank of X is less than k+1 and the matrix XTX will not invertible. One of the detection of multicollinearity is used detection-tolerance or the variance inflation factor (VIF) for multicollinearity where R2j is the coefficient of determination of a regression of explanatory j on all the other explanators. Tolerances of less than 0.20 or 0.10 or a VIF of 5 or 10 and above reveal a multicollinearity problem. 3.3.6 Breusch-Godfrey Serial Correlation LM Test Breusch-Godfrey Serial Correlation LM test is a test of autocorrelation that is basically allows for nonstochastic regressors such as the lagged values of the regressand; higher-order autoregressive schemes such as AR (1), AR (2), etc and higher-order moving averages of white noise error terms such as t. Two variable regression models to illustrate the test, regressors can be added to the model and also lagged values of the regressand can be added to the model. Yt =ÃŽÂ ²1 +ÃŽÂ ²2Xt +ut The error term ut assume that the pth-order autoregressive, AR (p), Ut = ptut-1 + ptut-2 + à ¢Ã¢â€š ¬Ã‚ ¦+pput-p + t. where t.is a white noise error term. The null hypothesis H0 can be show as Ho: p1 = p2 = à ¢Ã¢â€š ¬Ã‚ ¦ = pp = 0 (no autocorrelation) At 5% significant level, if the computed p value of Chi-square is less than Chi-square tests, do not reject the null hypothesis, meaning that there is no autocorrelation problem. If computed p value of Chi-square is more than Chi-square tests, reject the null hypothesis, meaning that there is autocorrelation problem. 3.3.7 Autoregressive Conditional Heteroscedasticity Test In econometrics, Autoregressive Conditional Heteroskedasticity (ARCH) model assume that the variance of the current error term is related to the previos one. Autoregressive Conditional Heteroskedasticity model is used to model the time series with time-varying volatility such as stock price. 3.3.8 Specification error Ramsey Regression Equation Specification Error Test (Ramsey RESET test) is used to examine the specification error. The specification test for the linear regression model. More specifically, it is used to test the specification error in the equation. As the result, if the non-linear combinations of the independent variables have any power in explaining the dependent variable, means that the model is mis-specified. Consider the model Ã…Â · = E {y | à Ã¢â‚¬ ¡ } = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ The Ramsey test is used to test whether the (ÃŽÂ ²1à Ã¢â‚¬ ¡)2, (ÃŽÂ ²2à Ã¢â‚¬ ¡)3à ¢Ã¢â€š ¬Ã‚ ¦,(ÃŽÂ ²k-1à Ã¢â‚¬ ¡)k has any power in explaining y. The Ramsey test is executed by calculate the following linear regression Ã…Â · = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ + ÃŽÂ ²1Ã…Â ·2 +à ¢Ã¢â€š ¬Ã‚ ¦+ ÃŽÂ ²k-1Ã…Â ·k + ÃŽÂ µ After examine the test, the means of the F-test is to determine whether ÃŽÂ ²1 through ÃŽÂ ²k-1 are zero. If the null hypothesis reveals that all regression coefficients are zero, means that the null hypothesis cannot be reject, the Ramsey test is unable to detect any misspecification. If the null hypothesis is rejected, means that the model is misspecification. 3.3.9 Jarque-Bera Test of Normality Jarque-Bera test of normality is used to test the normally distributed. It is large-sample or an asymptotic test and based on the OLS. The test first calculates the skewness and kurtosis measures of the OLS residuals. JB = n Where the n = sample size, S = skewness coefficient, and K = kurtosis coefficient. The normally distributed variable, S is zero and K is three. Hence, the Jarque-Bera test of normality is a test of the joint hypothesis that S and K are zero and three, respectively. Therefore, the value of the Jaque-Bera statistic is expected to be zero. For the null hypothesis the residual is normally distributed, asymptotically (i.e., in large samples) the Jarque-Bera statistic gives the chi-square distribution with two degree of freedom showed by Jarque and Bera (Gujarati 2003) For the alternative hypothesis the residual is not normally distributed. At 5 significant levels, computed p value is less than Jarque-Bera statistic, we can reject the null hypothesis that the residual is not normally distributed whereas computed p value is more than Jarque-Bera statistic, we do not reject the null hypothesis that the residual is normally distributed. CHAPTER 4: RESEARCH RESULTS AND INTERPRETATION 4.1 Introduction This chapter consists of the results and interpretation of the relationship between Unemployment as an Indicator of Macroeconomic Performance Unemployment as an Indicator of Macroeconomic Performance The rate of unemployment is one of the most important indicators of macroeconomic performance. Unemployment arises due to the distortions in the supply of labor cause by the non-competitive wage differential. During the period from 1945 until at least 1968, unemployment rates in the major European economies were extremely low by todays standards. For instance in the United Kingdom, the average rate of unemployment for the entire period was about 1.8% of the labor force and in worst years it did not even exceed 2.5%. The main driving force was autonomous rather than policy related. These forces include waves of new products and processes, spread of trade and development around the world. However the cause of unemployment problem in Europe in comparison to the United States was their labor market institutions while the United States is far more superior due to the flexibility of their labor market. In this paper, determinants of unemployment in US are the concerns with economic growth as the main concern. Economic growth of a nation is the increase in a nations real output that occurs over time. In general, growth and unemployment are closely related as unemployment affects the growth rate through the scale of operation of an economy. Besides that, FDI inflow and inflation are taken into account altogether to identify the relationship towards the unemployment rate. 1.1 Background As unemployment is one of the most important economic indicators, the unemployment rate provides useful information such as how the labor market works as well as the percentage of human capital that is not used in the production process, which is especially crucial towards policy makers. Consequently, it is important to analyze the factors that impact the unemployment rate regardless short or long term perspective. The United States of America is a developed country which has one of the largest population and production in the world (Encyclopedia, 2010). As unemployment are explained by structural factors mainly by inflexible labor market. One may wonder the about the impact which economic growth, inflation and FDI have on the unemployment rate of the United States of America as the clutches of unemployment are hard to escape even for a develop country, especially for US which possesses by far the most flexible labor market. As a case study, the United States of America has been chosen as the research country. United States of America is reckoned to be particularly appropriate as United States of America labor market has proven by all accounts to be more dynamic in the sense of a higher level of job turnover, resulting in high vacancy levels at any point in time. Recently, unemployment rate in the United States of America has been found to be as high as 9.6% as of August 2010 compared to the 4. 1% ten years ago (Bureau of Labor Statistics, 2010). In the mean time the real GDP growth in 2000 was at 4.14% when the unemployment rate was 4.1% while the real GDP growth in 2003 was at 2.49% when the unemployment rate was 5.8% (Bureau of Labor Statistics, 2010). From here, it can be seen that unemployment rate moves in the opposite direction of economic growth, yet there were different versions of results concluded by different previous researchers. 1.2 Problem Statement Unemployment has been a famous macroeconomic variable that researchers tend to use to study on but even with so many researches carried out, some of the results obtained are not consistent with one and another. For instance, the debates among Monetarist and Keynesian views of unemployment as well as the new contributions of Lucass approach and new Keynesian Economics shows that there was no reason to account for growth in the unemployment model. However, a significant innovation occurred with Pissarides'(1990) formulation of an unemployment theory in equilibrium. In many previous attempts, he formalize a unique framework to study the labor market dynamic perspective, providing useful tools to analyze both long and short run unemployment. Pissarides also introduced a first link between long run unemployment and growth which matches the neoclassical framework of economic growth. ( Pissarides, 1990 Ch. II) In the case of US, its economy began its current economic recovery in December 2001. However, rather than experiencing employment growth, not only did the unemployment rate increase but the number of new jobs created in the economy actually declined significantly during the first year of the recovery (Seyfried). Thus this paper is conducted so as to affirm the relationship of economic growth has on the unemployment rate of the country. As some results obtained by past researchers showed that economic growth impacts unemployment whereas the others came to a conclusion that unemployment causes economic growth whereby the existence of Granger Causality relationship is quite possible. In this study, economic growth, inflation and FDI serves as explanatory variable to determine the relationship towards unemployment rate in the United States of America. 1.3 Objectives This study aims to investigate the determinants of unemployment rate in the United States of America with economic growth as the main concern in addition with inflation and FDI (foreign direct investment) to further assure that it is coherent with the results obtained from previous studies. 1.3.1 Specific objectives This paper aims to examine the relationship between economic growth, inflation and FDI towards the unemployment rate. On the other hand, this paper serves to probe further into the relationship between economic growth, FDI, and inflation towards unemployment to sustain the existence of granger causality relationship. 1.4 Significance of study The contribution of carrying out this study is to allow policy makers to have an insight of unemployment so as to allow them to decide on suitable policy that will help bring down the unemployment rate while sustaining appropriate inflation level and attract sufficient FDI inflow. The results generated will help provide insight to the nature of the relationship between economic growth, inflation, and FDI towards unemployment. It would be useful to policy makers to know the rate and relationship of economic growth as it is necessary to reduce the unemployment rate, or at least keeping it from rising. Moreover, in previous studies, FDI is found to have impacted the unemployment rate indirectly through spillover effects from economic growth. In this study, however, FDI is incorporated directly to affect unemployment growth; therefore the effectiveness of the implemented policy will be taken into account more effectively. CHAPTER 2: Literature Review 2.1 Conceptual Model According to Alexopolous (2003), in the case where there is technological growth in the economy, families will increase their investment in capital, which in turn increase the amount of family purchased consumption workers receive over time. As a result, firms optimally increase the wage rate proportionately in order to prevent workers from shirking on the job. Therefore, the rate of unemployment along the balanced growth path will not change over time, since the marginal product of labour and the marginal cost of labour grow at the same rate. Based on De Groot, in general, growth and unemployment are intimately related for two reasons. Unemployment affects the scale of operation of the economy and thereby the growth rate. Growth affects inter-temporal decisions of workers about where to allocate on the labor market once they are laid off, and thereby it affects equilibrium unemployment. According to Brecher (2007), rapid economic growth and FDI, accompanied by higher per capita income, usually increase output growth. Thus, domestic firms and foreign multinational corporations will demand more labour force with skills to create products. Hence, economic growth can promote future employment growth for labour force based on new Keynesian theory of the output-inflation tradeoff. Some studies found that overseas investment replaced domestic employment in developing countries; however, the same result did not happen in developed countries. Tremblay (2007) pointed out that based on classical economic theory, the Phillips Curve illustrated long-run tradeoff between unemployment and inflation. There is an inverse relationship between inflation and unemployment, that is saying inflation will rise when unemployment decrease and vice-versa. Futhermore, Luciano Fanti and Piero Manfredi (2003) mention that the neoclassical Solow model, which still provides excellent econometric fits and shows a globally stable positive growth equilibrium, but also shows two restrictive features as regards the scope of this paper: (1) it does not take into account the stylized fact of the existence of unemployment, which is generally not only positive but also strongly fluctuating; (2) in such a model fluctuations have never been endogenously determined Meanwhile, Martin Zagler (2006) noticed that the cost associated with economic growth is structural unemployment, as structural change destroys jobs in one firm and creates jobs in another. The source of unemployment is the rate of intra-sector structural change associated with faster economic growth. Besides, Bonatti (2007) says that an increase of the workers influence on the political process may raise the fraction of GDP allocated to finance the welfare state, thus leading to a higher unemployment rate and to a lower growth rate. The research work done by Chang (2007) noticed that when the degree of trade openness of Taiwan is larger, the unemployment rate of Taiwan will increase, this is because the young men and young women in Taiwan desire to extend their education in working age. According to Phillips (1998), the negative relationship between inflation and unemployment can be explained through governments expansionary policy to increase the consumption level of the citizens. As labor market tightens, unemployment rate will fall as money wages tended to rise more rapidly. Unemployment will then increase as government tries to control the inflation rate. This is because the increment in wages is closely related with the increase in price. Therefore, the trade-off between these two variables can be seen. 2.2 Methodology Effects panel regression methods were used by Zagler (2006) on the relationship between economic growth and unemployment. Moreover, Zagler (2006) checked his estimated model with the unit-root test to test the stationary of the model. In order to obtain information about the relationship between inflation and unemployment, the procedure of den Hann was employed by Bae (2006), which has the advantage as no assumptions about the order of integration in the variables of interest is required. The procedure estimates a vector regressions (VAR) model and analyzes the correlations of VAR forecast errors of inflation and unemployment at long horizons. Chang (2007) used vector autoregression method of variance decomposition and impulse response function analysis are applied to analyze various relationships among foreign direct investment (FDI), economic growth, unemployment and degree of openness in Taiwan. Besides that, he also uses the unit root test of augmented Dickey-Fuller (ADF and KPSS) test to examine the stationary properties of the economic time series. The appropriate lag-length in the ADF regression is selected by minimizing the Akaikes information criterion (AIC). He also uses co-integration test to determine whether there exists a long-run equilibrium relationship among variables and weak exogeneity, and multivariate Granger-causality test to determine their causal direction in the short-run between all variables. Besides, he also has applied the VAR technique of variance decomposition and impulse response function analysis to analyze various inter-relationships between FDI, unemployment rate and GDP variables in the case of Taiwan from the period of 1981 to 2003. Meanwhile, Eric Heyer, FrÃÆ' ©dÃÆ' ©ric ReynÃÆ' ¨s, Henri Sterdyniak (2006) present the results of the DF-GLS unit root test to test the growth rate of consumer price and also unemployment rate. 2.3 Empirical Result Zagler (2006) has carried out a research which empirically investigated the link between economic growth and unemployment, using micro econometric evidence for the United Kingdom. The results generated showed a significant and negative relationship between unemployment and economic growth. According to the result generated by Muscatelli and Tirelli (2001), it is proven that there is a negative relationship between economic growth and unemployment as Japan, Germany, Italy, France and Canada. This result is generally in favour of those theories which predict a negative linkage between unemployment on economioc growth Besides, Pehkonen (2000) stated that a fall in GDP has significant relationship with unemployment as a drop in the GDP in Finland leads to an increase in the unemployment since demand for labor have shrunk. Therefore, Pehkonen (2000) concluded that unemployment would increase as a result of a decrease in economic growth. Meanwhile, Mitra and Sato (2007) found that the major links between external scale economies and growth are perceived in terms of technical efficiency, and higher growth is taken to reduce the unemployment rate. Futhermore, Scahaik and Groot (1998) found that the unemployment and economic growth relationship in imperfect competition economy and different periods, where structural changes occur, has a negative correlation and effect of different degrees through testing the structural stability. Chang (2007) proved that economic growth as well as FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. In addition, according to Solows growth theory, employment for labour force with skill can further promote economic growth and this can be verified by Taiwans economy model. Okuns law stating that reducing unemployment for labour force can promote further economic growth is then verified. Furthermore, unemployment is very sensitive to changes in GDP and vice versa, which does lend support that rising economic growth can obviously affect unemployment for labour force. shock of unemployment rate has negative effect on economic growth . He also mentions that the shocks in economic growth and FDI inflow decrease the unemployment rate. This means that rapid economic growth and FDI inflow, accompanied by higher per capita income can promote future employment growth for labour force. In the research study of Meckl (2001), correlation between growth and unemployment is shown to be positive if the research sector is of the high-wage sector in the economy, and negative if the research sector is the low-wage sector. Arico (2003) has already observed that the rate of growth is negatively related with the rate of unemployment. If the growth rate increases, it will decrease the net rate at which the stream of profits is discounted. For each firm the entry will result less costly. More vacancies will be created, reducing the unemployment rate. (Capitalization effect).On the other hands, It will reduce the life-time of each firm, by increasing the price for human capital. Each innovation will generate fewer vacancies than before. That will be reflected in an increase of the rate of unemployment. (Indirect creative destruction effect). Besides, Fanti and Manfredi (2003) has shown a negative relation between unemployment and growth , though we should also mention the positive relation between unemployment and growth obtained in the particular creative disruption context according to Schumpeters idea. Fanti and Manfredi alsomshows a surprising relation between unemployment and growth (via effects on population which is an endogenous engine of growth): this relation can be either positive or negative depending on the relative levels of cost of childrearing of workers and unemployed persons and the level of unemployment benefits. Meanwhile, Bonatti (2007) noticed that reduction of government transfers in favor of the workers allows decreasing the ratio of total tax revenues to GDP, thus monotonically increasing the growth rate and leading to a lower unemployment rate. CHAPTER 3: RESEARCH METHOD 3.1 Data Analysis 3.1.1 Unemployment Rate In this study, unemployment rate is the main study which was examine by using some explanatory variables. According to BLS, Bureau of Labor Statistics, (2009) those people who are with jobs can be considered as employed. On the other hand, a person will be classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Dixon Shepherd (2002) stated that the unemployment rate can be considered as one of the most important indicators of macroeconomic performance in a country. The data of unemployment rate is obtained from the Bureau of Labor Statistics (BLS) which if measured in percentage from those people who are 16 years old and above from year 1970 to 2007. The method which BLS used to calculate the unemployment rate in United States is: X 100% 3.1.2 Real Gross Domestic Product Real gross domestic product (Real GDP) in a country can be measured by the total output value of goods and services which produced from the domestic labor in the country in a given year, expressed in base-year prices. In this study, it is expected that there is a negative relationship between the Real GDP and unemployment rate in United States. The source of the United States Real GDP data is from the World Bank World Development Indicators and International Financial Statistics of the IMF. On the other hand, the data obtained was converted to a 2005 base year. The formula to calculate the data of United States Real GDP is as below: 3.1.3 Foreign Direct Investment Foreign direct investment (FDI) is a kind of investment which is made to serve the business interest of the investor in a company which is in a different nation distinct from the investors country of origin. An example of FDI is a foreign company comes into a country to build or buy a factory and run a business there. Many economists believe that FDI is good for an economy, because it provides domestic job opportunities and increase domestic capital. In this study, net inflows of foreign direct investment in the measurement of current US Dollar are used. A net inflow of foreign direct investment is the total amount or value of the investment flow into United States from foreign investors to operate their business in United States and negative relationship between foreign direct investment and unemployment rate is expected in United States. 3.1.4 Consumer Price Index Consumer price index (CPI) is measured that examines the weighted average of prices of a basket of consumer goods and services in a country, such as transportation, food, rental fees and utilities fees. CPI is one of the measurements of inflation rate. According to Bureau of Labor Statistics (BLS), the prices for the goods and services used to calculate the CPI are collected in 87 urban areas in United States from about 23,000 retail and services establishments. The CPI data used in this study included all consumer items in United States from year 1970 to 2007. 3.2 Research Framework 3.2.1 Unemployment rate and Real Gross Domestic Product Based on the study, unemployment and real gross domestic product is expected to be negatively related. Edward (2007) stated there is a negative relationship between real gross domestic product and unemployment because of the theory of Okuns law. According to Okuns law, 1% increase in the unemployment rate will decrease GDP by 3%. However, Christopher (2010) said that, Okun coefficients can change over time because the relationship of unemployment to output growth depends on laws, technology, preferences, social customs, and demographics. 3.2.2 Unemployment and Consumer Price Index Consumer price index is one of the most frequently used statistics for identifying periods of inflation or deflation. This is because large rises in CPI during a short period of time typically denote periods of inflation. Therefore, we expect that there is an inverse relationship between the rate of unemployment and rate of inflation. According to the Phillips Curve theory, if the unemployment is high, inflation tends to be low. The diagram below shows the Phillips curve. Inflation Phillips curve Unemployment However, the result shows a positive relationship in our regression model. This problem will occur because of the multicolinearity problem in our regression model. But when one independent variable by one independent variable with the unemployment is tested, negative sign for consumer price index and unemployment are obtained. Bae (2006) stated that there is a positive long run relationship between unemployment and inflation. 3.2.3 Unemployment and Foreign Direct Investment In this study, inflow of foreign direct investment were expected to affect the unemployment rate significantly and expected that foreign direct investment has a negative long run relationship with unemployment. Foreign direct investment will increase job opportunities so, unemployment rate will decrease. Shu (2007) stated that FDI have negative effects on unemployment as FDI are expected to generate economic growth by encouraging the expansion of trade and foreign investment. 3.3 Econometric Methodology 3.3.1 Introduction This chapter consist the used of the method to examining the relationship between the unemployment and economic condition in United State by using the time series data ranging from the year 1970 to 2007. First, the result testing will start with the test of stationary by using Augmented Dickey-Fuller unit root test and proceed with the cointegration test. Secondly, the Multiple Regression Analysis and several ways to detect the assumption of the Classical Linear Regression Model (CLRM). The multicollinearity is used to test the correlation analysis. Breusch-Godfrey Serial Correlation LM Test is used to test the existence of serial autocorrelation, Autoregression Conditional Heteroscedasticity Test is used for testing the heteroscedasticity variance of error of the model and Ramsey RESET Test is used to detect the linearity regression and misspecification error. Unemployment = f (RGDP, FDI, CPI) RGDP = Real Gross Domestic Product FDI = Foreign Direct Investment CPI = Consumer Price Index The change in unemployment is our main study that we want to examine with using a few of variables which are RGDP (Real Gross Domestic Product), FDI (Foreign Direct Investment) and CPI (Consumer Price Index). y = ÃŽÂ ²0 + ÃŽÂ ²1Ln (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3 (FDI) + Econometric Model with Expected Sign: = ÃŽÂ ²0 + ÃŽÂ ²1L (RGDP) + ÃŽÂ ²2 (CPI) + ÃŽÂ ²3(FDI) (-ve) (-ve) (-ve) Where +ve indicates that there is a postive relationship between the explanatory variable and dependent variable. On the other hand, -ve indicates that there is a negative relationship between the explanatory variable and dependent variable 3.3.2 Unit root A unit root test is used to examine whether a time series variable is stationary. In the model, T-statistic, F-statistic and R-squared are used to determine to ensure the validity of the test statistics is stationary. The result will become spurious regression problem if the non-stationary series in the ordinary least square (OLS) regression is used. Spurious regression result in high significant T-statistic and highly value for the coefficient of determination R-squared, and the R-square is larger than Durbin Watson. Therefore, if the stationary does not hold, estimate is not consistent and result will be misleading. To avoid the spurious regression problem, the Augmented Dickey-Fuller test (ADF) is used to examine the stationary of the variable. An Augmented Dickey-Fuller test (ADF) is used to test for a unit root in a time series sample. The Augmented Dickey-Fuller (ADF) statistic used in the test is a negative number. Therefore, the more negative value is, more power the rejection of the hypothesis that there is a unit root at some level of confidence. The equation for Augmented Dickey-Fuller (ADF) test Where ÃŽÂ ± is a constant, ÃŽÂ ² is the coefficient on a time trend and p is the lag order of the autoregressive process. ÃŽÂ ± = 0 and ÃŽÂ ² = 0 corresponds to modeling a random walk and ÃŽÂ ² = 0 corresponds to modeling a random walk drift. By including lags of the order p, the ADF formulation allows for higher-order autoregressive processes. This means that the lag length p needs to be determined when applying in the test. One possible approach is to test from high orders and examine the t-value on coefficients. The criterion such as the Akaike information criterion (AIC), Schwarz-Bayesian information criterion (SBIC) or the Hannan-Quinn information criterion (HQIC) test is used to examine the lag length. 3.3.3 Granger Causality The Granger Causality test indicates that a time series Y is said to be Granger caused by X if X helps the prediction of Y or equivalently if the coefficients on the lagged X are statistically significant. Granger Causality shows two-way causation in the case. X Granger causes Y and Y Granger causes X. It usually through a series of t-tests and F-tests on lagged values of X and lagged values of Y. 3.3.4 Multiple Regressions The ordinary least squares (OLS) or linear least squares are a method to examine the unknown parameters in a linear regression model. It is used to assume the distribance, ui. According to Gujarati (2003), ui stands for the normal distribution representing zero mean and constant variance, à Ã†â€™2 in the multiple regression models. With the normality assumption, OLS estimators 1, and 2 are linear functions of ui. Therefore, if ui are normally distributed, so 1,and 2 will make hypothesis testing more straightforward. OLS estimators of the partial regression coefficients are identical with the maximum likelihood (ML) estimators. There are the best linear unbiased estimators (BLUE). Besides, the least-square estimators are best unbiased estimators (BUE); it means that they have minimum variance in the entire class of unbiased estimators. 3.3.5 Multicollinearity Multicollinearity shows the two or more independent variables in a multiple regression model are highly linearly related. The multicollinearity test is perfect if the correlation between two independent variables is equal to 1 or -1. Multicollinearity will occur when there is a strong linear relationship among two or more independent variables. The equation below is refer the variables is perfectly multicollinear if there exist one or more exact linear relationships among some of the variables. Estimates for the parameters of the multiple regression equation is The ordinary least squares estimates include inverting the matrix XTX where, It indicate that if the linear relationship (perfect multicollinearity) is exactly with the independent variables, the rank of X is less than k+1 and the matrix XTX will not invertible. One of the detection of multicollinearity is used detection-tolerance or the variance inflation factor (VIF) for multicollinearity where R2j is the coefficient of determination of a regression of explanatory j on all the other explanators. Tolerances of less than 0.20 or 0.10 or a VIF of 5 or 10 and above reveal a multicollinearity problem. 3.3.6 Breusch-Godfrey Serial Correlation LM Test Breusch-Godfrey Serial Correlation LM test is a test of autocorrelation that is basically allows for nonstochastic regressors such as the lagged values of the regressand; higher-order autoregressive schemes such as AR (1), AR (2), etc and higher-order moving averages of white noise error terms such as t. Two variable regression models to illustrate the test, regressors can be added to the model and also lagged values of the regressand can be added to the model. Yt =ÃŽÂ ²1 +ÃŽÂ ²2Xt +ut The error term ut assume that the pth-order autoregressive, AR (p), Ut = ptut-1 + ptut-2 + à ¢Ã¢â€š ¬Ã‚ ¦+pput-p + t. where t.is a white noise error term. The null hypothesis H0 can be show as Ho: p1 = p2 = à ¢Ã¢â€š ¬Ã‚ ¦ = pp = 0 (no autocorrelation) At 5% significant level, if the computed p value of Chi-square is less than Chi-square tests, do not reject the null hypothesis, meaning that there is no autocorrelation problem. If computed p value of Chi-square is more than Chi-square tests, reject the null hypothesis, meaning that there is autocorrelation problem. 3.3.7 Autoregressive Conditional Heteroscedasticity Test In econometrics, Autoregressive Conditional Heteroskedasticity (ARCH) model assume that the variance of the current error term is related to the previos one. Autoregressive Conditional Heteroskedasticity model is used to model the time series with time-varying volatility such as stock price. 3.3.8 Specification error Ramsey Regression Equation Specification Error Test (Ramsey RESET test) is used to examine the specification error. The specification test for the linear regression model. More specifically, it is used to test the specification error in the equation. As the result, if the non-linear combinations of the independent variables have any power in explaining the dependent variable, means that the model is mis-specified. Consider the model Ã…Â · = E {y | à Ã¢â‚¬ ¡ } = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ The Ramsey test is used to test whether the (ÃŽÂ ²1à Ã¢â‚¬ ¡)2, (ÃŽÂ ²2à Ã¢â‚¬ ¡)3à ¢Ã¢â€š ¬Ã‚ ¦,(ÃŽÂ ²k-1à Ã¢â‚¬ ¡)k has any power in explaining y. The Ramsey test is executed by calculate the following linear regression Ã…Â · = ÃŽÂ ²Ãƒ Ã¢â‚¬ ¡ + ÃŽÂ ²1Ã…Â ·2 +à ¢Ã¢â€š ¬Ã‚ ¦+ ÃŽÂ ²k-1Ã…Â ·k + ÃŽÂ µ After examine the test, the means of the F-test is to determine whether ÃŽÂ ²1 through ÃŽÂ ²k-1 are zero. If the null hypothesis reveals that all regression coefficients are zero, means that the null hypothesis cannot be reject, the Ramsey test is unable to detect any misspecification. If the null hypothesis is rejected, means that the model is misspecification. 3.3.9 Jarque-Bera Test of Normality Jarque-Bera test of normality is used to test the normally distributed. It is large-sample or an asymptotic test and based on the OLS. The test first calculates the skewness and kurtosis measures of the OLS residuals. JB = n Where the n = sample size, S = skewness coefficient, and K = kurtosis coefficient. The normally distributed variable, S is zero and K is three. Hence, the Jarque-Bera test of normality is a test of the joint hypothesis that S and K are zero and three, respectively. Therefore, the value of the Jaque-Bera statistic is expected to be zero. For the null hypothesis the residual is normally distributed, asymptotically (i.e., in large samples) the Jarque-Bera statistic gives the chi-square distribution with two degree of freedom showed by Jarque and Bera (Gujarati 2003) For the alternative hypothesis the residual is not normally distributed. At 5 significant levels, computed p value is less than Jarque-Bera statistic, we can reject the null hypothesis that the residual is not normally distributed whereas computed p value is more than Jarque-Bera statistic, we do not reject the null hypothesis that the residual is normally distributed. CHAPTER 4: RESEARCH RESULTS AND INTERPRETATION 4.1 Introduction This chapter consists of the results and interpretation of the relationship between