Assessment

ASSESSMENT

Component 2: This assessment will be a group portfolio of 2,000 words report and a 15 mins group presentation of the report.

Details of the task:

For this assignment, you are tasked with constructing a forecasting model of your chosen country’s (ITALY)saving (consumption) behavior using the VAR/VECM approach. You will use your model to assess whether or not there has been a structural break in the country’s saving (or consumption) function since the onset of the financial crisis in the last quarter of 2007. You will need to demonstrate the model’s usefulness by showing that it is able to predict, within sample, the behavior of the actual saving (or consumption) rate for 1961q1–2007q4.

After you have formulated your preferred model for the saving (or consumption) function, assess its out-of-sample forecasting performance (i.e., for 2008q1-2019:4) and whether your chosen country’s saving (or consumption) rate reverts to its pre-crisis levels. This requires you to decide whether the parameters of your preferred model have changed since 2007q4 using appropriate statistical tests.

Broad guidelines:

1. Data on most country’s consumption, income, and saving can be downloaded from the Federal Reserve Bank of St. Louis database (FRED), the country’s statistical database or the IMF databank. You are required to download quarterly data from the first quarter of 1961 to the fourth quarter of 2019.
2. To get a feel for the data, plot the variables using both a time plot (using the log level) and a scatter plot (using Δlog rather than the log level). Also, regress your dependent variable on a constant and other exogenous variables and then examine the fitted residuals, looking for evidence of any changes in the relationship between consumption, disposable income and net wealth. Is there a structural break in the relationship? If so, use a dummy variable to allow for it.
3. Specify a long-run model for real consumption using real disposable income, and any other variables that you feel can explain the long-run behavior of consumption. If using savings, be sure to specify relative long-run model. Be sure to state your priors for the correct signs of the coefficients before estimating the model. Also, it would be helpful if your model was expressed in “log” form, so that the parameter estimates are elasticities.
4. The sample period for model specification (selection of your best model for forecasting purposes) must end at 2007:4. In preliminary work, it’s been found that workable specifications for the aggregate consumption function can be found using data from 1961:1 onwards.
5. Determine the statistical properties of the variables used in your analysis (i.e., I(0) or I(1)). Formally test for unit roots in the data and cointegration if appropriate, and estimate the long-run model using an appropriate estimator given the statistical properties of the data. The model could be expressed in levels form if you feel that the data supports that specification.
6. Starting from the “long-run” specification, construct an equation (e.g., an error correction equation) that can explain the actual behavior of consumption during the sample period. Justify the ECM specification using standard regression diagnostics, including robustness of the parameter estimates, lag-length selection, and residual diagnostics (actual versus fitted).
7. Use your preferred model and the EViews’ solver to produce dynamic & static, forecasts for your chosen country’s savings (or consumption) rate for 2008:1-2019:4 (depending on availability of data). Given your findings, discuss whether the increase or decrease in the country’s saving rate or consumption that occurred around 2007:4 is permanent or transitory.

In all, please support your analysis with graphical representations of the saving rate (or consumption), for the out of sample forecast. Given that you are working with real aggregate consumption, the implied saving rate will need to be calculated using the standard NIPA tables definition (see the definition provided in the footnote below^[1]).

Report Structure

Your report should follow the following structure:

Title Page:

The title page must include the following:

• The Title of the project: In this case, Predicting [insert your country] Saving (or Consumption) Behaviour after the 2008 Financial Crisis.  
• Student numbers: your NAME must NOT appear in the report
• Course name and year of submission.

Executive summary:

Maximum 200 words (not included in the words count) of a summary of the project’s main aim, approach, and results.

Table of Content Page:

This page lists the main parts of the report, together with their page numbers.

Introduction: A quick overview of the behaviour of your chosen country’s household sector’s saving rate (or consumption) since the 1990s.

Methodology:  Case study (any of country of your choice). Here you will explain how you are planning to provide empirical evidence in order to support your hypothesis. Discuss the data sources, description and econometric methods applied.

Discussion: You discuss the results here and any other implications, including the various robust checks applied.

Conclusion: Should contain a summary of your main findings and identify areas of importance.

References:  You should present all your sources following the Harvard Referencing System

Appendix(s):

If needed such as diagrams, news clips, figures and graphs, which are too large for the text, should be provided in this section.

General Presentation of your report

The report must be word processed or typed on A4 paper, double spaced with 25mm margins. The font size must be such that the project is easily readable e.g. a font size of either 12 or 14 points (excluding headings). Use widely-used fonts such as Times New Roman, not those that might be considered informal or unusual. Pages must be sequentially numbered.

Chapters, sections and sub-sections must be clearly identified and sequentially numbered or lettered, with separate chapters beginning on a new page.

Diagrams, graphs, figures, tables, pictures and charts must be incorporated into the report and they should be clearly labelled and referenced.

Reference guidance

References must be accurately provided in the text using the Harvard System (see “Cite Them Right: the essential referencing guide” 9th edition).  All quotations must be acknowledged and correctly presented within the text i.e. other than very short ones, quotations should be indented and in single spacing. As a student you will be taught how to write correctly referenced essays usingUEL’s standard Harvard referencing system from Cite Them Right . Cite them Right is the standard Harvard referencing style at UEL for all Schools apart from the School of Psychology which uses the APA system. This book will teach you all you need to know about Harvard referencing, plagiarism and collusion.  The electronic version of “Cite Them Right: the essential referencing guide” 9th edition, can be accessed whilst on or off campus, via UEL Direct. The book can only be read online and no part of it can be printed nor downloaded.

Word Count

• Your word count should not include your abstract, or reference list. You should provide your word count at the end of your report. 
• Should not exceed the word count by more than 10%; if it does, it will result in a penalty of 5% of your marks for your work. 

• If your work is significantly shorter, then you will probably have failed to provide the level of detail required.

Number of words should be mentioned at the end of the dissertation and before the bibliography.

Grading criteria outline

Learning outcomes assessed

1 – 10, as indicated in the module guide

Submission guidelines

We strongly suggest that you try to submit all coursework by the deadline set as meeting deadlines will be expected in employment.  However, in our regulations, UEL has permitted students to be able to submit their coursework up to 24 hours after the deadline.  The deadline is published in this module guide.  Coursework which is submitted late, but within 24 hours of the deadline, will be assessed but subjected to a fixed penalty of 5% of the total marks available (as opposed to marks obtained).  If you submit twice, once before the deadline and once during the 24-hour late period, then the second submission will be marked and 5% deducted.  This rule only applies to coursework.  It does not apply to examinations, presentations, performances, practical assessments or viva voce examinations.  If you miss these for a genuine reason, then you will need to apply for extenuating circumstances, or accept that you will receive a zero mark.

Notice is hereby given that all submissions for component 1 of this module [individual and group portfolio] must be submitted to Turnitin.”  If you fail to submit any of the assessment task to Turnitin, in accordance with the guidance provided on the Virtual Learning Environment (Moodle), a mark of 0 will be awarded for the component.

Submitting Assessments Using Turnitin:

Turnitin is required for coursework assessments, such as report/research papers or projects in Microsoft Word, PowerPoint, and in PDF format.  There are two main reasons we want you to use Turnitin:

• Turnitin can help you avoid academic breaches and plagiarism.  When you use Turnitin before a submission deadline, you can use the Originality Report feature to compare your work to thousands of other sources (like websites, Wikipedia, and even other student papers).  Anything in your work that identically matches another source is highlighted for you to see.  When you use this feature before the deadline, you will have time to revise your work to avoid an instance of academic breach/plagiarism. 
• Turnitin saves paper.  When using Turnitin to electronically submit your work, you will almost never have to submit a paper copy. 

Late Submissions Using Turnitin

UEL has permitted students to be able to submit their coursework up to 24 hours after the deadline.  Assessments that are submitted up to 24 hours late are still marked, but with a 5% deduction.  However, you have to be very careful when you are submitting your assessment.  If you submit your work twice, once using the original deadline link and then again using the late submission link on Turnitin, your assignment will be graded as late with the 5% deduction.

Feedback and return of work

You will receive detailed feedback on each of the summative assessments mentioned in the table above. Feedback will also include constructive comments on how to improve performance in relation to the academic standards of the university, where appropriate.

Face to face feedback on any aspect of the assessments will also be given during assessment and feedback week.

Extenuating Circumstances

Extenuating Circumstances are circumstances which: 

• impair your examination performance in assessment or reassessment, or
• prevent you from attending for assessment or reassessment, or
• prevent you from submitting assessed or reassessed work by the scheduled date

Re-assessment Work

You will need to re-sit any of the component if any of the following occur during the semester:

• You fail to achieve 30% or more for each component (portfolio or the exam)

You will need to re-sit the module if any of the following occur during the semester:

• You fail to achieve 40% for the module, overall.

You will be expected to complete a similar piece of work for your second attempt within 40 days of the release of your results.

Student Appeals

DETAILED GRADING CRITERIA – AT-A-GLANCE GUIDE

APPENDIX relevant key forms

N/A

^[1] The saving rate (percentage points) can be derived from total real consumption and real household disposable income using the following formula:

saving rate=100*(rdy – (rc + ((gov_transfers + interest_payments)/y_deflator)))/rdy. {where: rdy is real disposable income; rc is real consumption}. Note that the saving rate must be expressed in real terms because these are the variables that the model will forecast.

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