Russian Federation and United Kingdom: Comparison of Economy

1660 WordsMay 7, 20147 Pages
CONTENT INTRODUCTION The report gives information about main macroeconomic models which were applied to Russian Federation and United Kingdom. It consists of three parts. First part is dedicated to the identification of macroeconomic models for Russia and UK. The second part is about main macroeconomic changes between 2005 and 2012 in Russia and UK. Finally, effects of increase in interest rate by Bank of England to Russia and UK were described in the third part of the report. Secondary online sources and macroeconomic books were used. SMALL AND LARGE OPEN ECONOMIES IN THE LONG RUN If an economy can interact freely, by selling capital assets and goods and services in world…show more content…
We can see that they have positive relationship or upward sloping trend. It means that if interest rate rises, national saving will also increase. It is one of the requirements of small open economy. (Databank.worldbank.org, 2013) Second of all, I calculated current flow. Current flow= foreign direct investment net outflow – foreign direct investment net inflow. Then I found a relationship between interest rate and capital of flow, they have also positive relation and upward sloping curve which determines small open economy of UK. (Databank.worldbank.org, 2013) RUSSIA To determine smallness and largeness of Russian open economy, I tried to find relationship between National Savings and interest rate of Russia and found out that they have negative relationship, which means Russia is large open economy. (Databank.worldbank.org, 2013) Then I have calculated capital of flow with above mentioned formula and found a relationship between interest rate and capital of flow. According to the line graph below, they have negative relations and downward sloping graph, which means Russia is a large open economy. CF=CF(r), high domestic interest rate leads to increase foreign investments and increase domestic investments at home. (Databank.worldbank.org, 2013) When I did a research on economies of UK and Russia, I found some contradictory facts to my assumption about UK is small and Russia is large open economy. For example their currencies.

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