College of Business and Accountancy

Includes bibliographical references and index.

Acknowledgements ix CHAPTER 1 Introduction 1 CHAPTER 2 Gross Domestic Product 5 The Expenditure Approach 5 The Output Method 10 The Income Method 11 GNP vs. GDP 11 Release Schedule 12 Trend Growth 15 The Business Cycle 16 Monetary Conditions Index 19 Effects of Monetary Policy on GDP 19 Effects of the Exchange Rate on GDP 21 Exchange-Rate Defl ators 23 CHAPTER 3 Coincident Indicators 27 PMI Surveys 27 Industrial Production 31 CHAPTER 4 Leading Indicators 35 Financial Conditions Index 35 The U.S. Business Cycle 38 ZEW Survey 39 Ifo Survey 41 M1 Money Supply Growth 52 CHAPTER 5 Inflation Measures 57 Consumer Price Index 57 Producer Price Index 63 Labor Costs 65 Money Supply 68 Inflation Expectations 76 CHAPTER 6 The European Central Bank 83 Traffic Light System 86 Mandate 88 Two-Pillar Strategy 90 Monetary Policy Implementation 91 Intervention in the Currency Markets 93 Taylor Rule 95 CHAPTER 7 Other Institutions 101 Council of the European Union 101 European Parliament 102 European Commission 102 Ecofin 103 Eurogroup 103 European Council 104 CHAPTER 8 Euro Crisis 105 Origins 105 Optimal Currency Area Th eory 109 Fiscal Consolidation 111 Quantitative and Qualitative Easing 112 Government Bond Purchases 115 Measures of National Solvency 117 Target2 Balances 121 Resolution 123 Departure from the Euro Area 127 Tools for Analyzing Debt Sustainability 127 CHAPTER 9 Germany 133 Labor Market 133 Political Institutions 137 Political Parties 139 CHAPTER 10 France 143 CHAPTER 11 United Kingdom 145 The Bank of England 145 Quantitative Easing 153 GDP 155 Inflation Measures 157 House Prices 158 Political Institutions 164 CHAPTER 12 Switzerland 167 The Swiss National Bank 167 KOF Leading Indicator 168 CHAPTER 13 Sweden 171 CHAPTER 14 Norway 175 Bibliography 179 Index 197

The euro area remains in a state of flux and appears to be unsustainable in its present form. The outcome of the crisis may be unknown for years and a judgement on the project's success or failure may be out of reach for decades. In the meantime, analysts, portfolio managers and traders will still have daily, weekly, quarterly and annual benchmarks. They will have to analyze economic developments in the euro area and their impacts on financial assets. The objective of this book is to provide a framework for that analysis that..

College of Business and Accountancy