1. A Comparative Policy Analysis on Stock Market, Money Supply and Interest Rates in US, China and Australia during 2000 – 2011 DOLY HAN, BRITTANY HARRISON, TENZIN TUSNDU, JENNA BROOKS ECO 332 11/30/2013

2. Introduction  Understanding GDP’s relationship to economic variables is crucial to policy makers  Important component in ensuring effective macro- economic stability policies  Stronger Relationship >>> More Attention when developing policies to grow GDP  Comparative Analysis for years 2000-2011 between 1. China 2. United States 3. Australia  Why these countries??

3. Variables Selected  Real Gross Domestic Product  Money Supply -----M2 for US & China -----M3 for Australia  Stock Market ------Total Share Prices for all shares  Discount Rate  Gathered from FRED website

4. Regression Analysis Test  1 or -1 = Perfect Correlation ----If correlation is closer to 1 or -1 = Stronger Relation  Negatively Correlated >> Variables Have Inverse Effect Ie. If Variable A Increases that causes Variable B to decrease  Po sitively Correlated >>> Variables move in the same direction Ie. If Variable A Increases that causes Variable B to Increase

5. China  GDP’s correlation with Money Supply (M2)=.994 ^^^ Very Strong Positive Correlation  GDP’s correlation with Share Price=.596 ^^^ Moderate Positive Correlation  GDP’s Correlation with Discount Rate=.144 ^^^ Weak Positive Correlation

6. United States  GDP’s correlation with Money Supply (M2)=.898 ^^^ Very Strong Positive Correlation  GDP’s correlation with Share Price=.696 ^^^ Strong Positive Correlation  GDP’s Correlation with Discount Rate= -.321 ^^^ Weak Negative Correlation GDP Money Supply(M2) Share Prices Federal Fund Rate GDP 1 Money Supply (M2) 0.898572584 6 1 Share Prices 0.696801519 6 0.409406541 Federal Fund Rate - 0.321467351 -0.6096677920.397731851

7. Australia  GDP’s correlation with Money Supply (M2)=.970 ^^^ Very Strong Positive Correlation  GDP’s correlation with Share Price=.699 ^^^ Strong Positive Correlation  GDP’s Correlation with Discount Rate= -.156 ^^^ Weak Negative Correlation

8. Comparative Analysis of Correlations GDP & Money Supply  China:.994  Australia:.970  United States:.895  Money Supply is important tool in conducting monetary policy  Policies are placed to control money supply to keep GDP growing ie: US open market operations  Why is the United States lower?

9. Comparative Analysis of Correlations GDP & Share Prices China:.596 Australia:.699 United States:.696  All positive & moderately strong GDP & Discount Rate China:.144 Australia: -.156 United States: -.321  All very weak relationships

10. Comparative Analysis of Correlations Discount Rate & Money Supply China:.064 >>>> Very Weak Australia: -.273 >>>> Weak United States: -.609 >>>> Moderately Strong

11. Conclusions  More factors play a role but all things held constant all three countries have similar correlations  Evident that some of these macro-economic variables do have strong effects on GDP and play a key role in the stabilization of the economy  When growing GDP--- We assume policymakers would focus a great deal on…. ---- Stock market ---- Money Supply (Monetary Policy)

12. Questions??