Economic Data Analysis and Interest Rates

This assignment provides a comprehensive analysis of economic data from 1998 to 2017, covering nominal GDP, broad money, CPI, real GDP, deposit rates, and loan rates of interest. The data is presented in a table format with specific values for each year. Students are expected to understand the trends and relationships between these variables, making connections between economic indicators and their implications on financial markets.

MONEY AND BANKING

MONEY AND BANKING 1
INTRODUCTION 3
2. DATA COLLECTION AND DISPLAY 3
3. 3
a. Calculating broad money growth rate YC in percentage terms 3
b. Calculating percentage rate of inflation, π YC based on the CPIYC or the GDP deflator 4
c. Assessing percentage growth rate of real GDP for the sample period 5
d. Plotting the rate of inflation in respect of broad and the narrow money 7
e. Computation of correlation co-efficient 8
f. Plotting the real interest rate of deposit 8
g. Plotting the real interest rate of loan 9
4. 10
4a. Structure and the performance of the banking system. 10
4b. Regulatory and the supervisory measures in the banking system. 11
4c. Presence of the Islamic banking and the financial institution. 11
4d. Reasons and the changes that happened in the monetary policy. 11
4e. Discussion relating to the extent of the successful of the monetary policy. 12
5. Describing the view relating to the use of the monetary policy in solving the banking
problems worldwide. 12
CONCLUSION 12
REFERENCES 13
Books and journal 13

INTRODUCTION
Money and banking is one of the central components in macro-economics. Economic
growth, inflation and the low rate of the unemployment are been assessed through the money and
banking in the overall economy. The present study is based on the evaluation of the money and
banking data of the Srilanka and the description regarding the banking system of Srilanka.
2. DATA COLLECTION AND DISPLAY
Mentioned in appendix.
3.
a. Calculating broad money growth rate YC in percentage terms
Year Growth in broad money
1999 4.37%
2000 -0.75%
2001 1.50%
2002 0.85%
2003 0.10%
2004 4.26%
2005 1.49%
2006 -1.65%
2007 -4.29%
2008 -12.00%
2009 8.19%
2010 -12.70%
2011 33.25%
2012 -2.76%
2013 5.81%
2014 6.01%
2015 10.73%
2016 6.86%

Graphical presentation clearly shows fluctuating trend in the growth of broad money.
From the period of 2006 to 2010, negative growtrh was found in broad money of Sri-Lanka.
Thereafter, positive and increasing trend assessed in Sri-Lanka’s broad money.
b. Calculating percentage rate of inflation, π YC based on the CPIYC or the GDP deflator
Year
% change in GDP Deflator
[Base Year when index
=1.0
1998
1999 -54.8%
2000 74.8%
2001 87.8%
2002 -40.6%
2003 7.9%
2004 0.6%
2005 18.4%
2006 8.2%
2007 24.4%
2008 16.4%
2009 -64.0%

2010 287.8%
2011 -83.2%
2012 182.6%
2013 -42.4%
2014 -53.3%
2015 -77.7%
2016 528.6%
2017 102.5%
From the above graph and table it can be interpreted that the rate of GDP is having a
fluctuating trend over the time period of last 20 years. The GDP rate is a mixture of both positive
and negative rates ranging from the year 1998 to the year 2017.
c. Assessing percentage growth rate of real GDP for the sample period
Year Growth in real GDP
1999 118%
2000 -41%
2001 -49%
2002 76%
2003 5%
2004 8%
2005 -1%
2006 6%
2007 -9%

2008 7%
2009 185%
2010 -65%
2011 581%
2012 -63%
2013 87%
2014 127%
2015 352%
2016 -84%
2017 -48%
Interpretation: During the period of 20 years, no significant growth found in real GDP
level. The growth rate of GDP has been depicting a fluctuating trend including both positive and
negative rate during the period of 20 years. It is highest in the year 2011 with growth in GDP at
the rate of 581% and it was lowest during the year 2005 with rate of -1%.
d. Plotting the rate of inflation in respect of broad and the narrow money
Null hypothesis (H0): There is no statistical significant difference takes place in the mean value
of inflation and GDP deflator.

Alternative hypothesis (H1): There is a statistical significant difference takes place in the mean
value of inflation and GDP deflator.
SUMMARY
OUTPUT
Regression
Statistics
Multiple R 0.458607
R Square 0.210321
Adjusted R Square 0.163869
Standard Error 5.210026
Observations 19
ANOVA
df SS MS F
Signi
fican
ce F
Regressio
n 1 122.9024 122.9024 4.527729
0.048
28
Residual 17 461.4543 27.14437
Total 18 584.3567
Coefficients
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Lower
95.0%
Up
per
95.
0%
Intercept 45.84448 2.422648
18.9232
9
7.38E-
13 40.73314 50.95582 40.73314
50.
95
58
2

CPI
[replace
this with
Base
Year
when
index
=1.0] -0.53362 0.250777 -2.12785 0.04828 -1.06271 -0.00452 -1.06271
-
0.0
04
52
e. Computation of correlation co-efficient
Particulars Broad money (growth) Real GDP (growth)
Broad money (growth) 1 .84
Real GDP (growth) .84 1
f. Plotting the real interest rate of deposit
Year % change in deposit rate
1998 -
1999 -
2000 -
2001
2002 -14.46%
2003 -34.89%
2004 -15.49%
2005 11.10%
2006 20.67%
2007 33.50%
2008 19.92%
2009 -2.56%
2010 -34.98%
2011 -6.75%
2012 34.71%
2013 18.05%
2014 -26.72%
2015 -20.15%
2016 18.51%
2017 26.89%

g. Plotting the real interest rate of loan
Year Growth in loan interest rate
2001
2002 818%
2003 -69%
2004 -59%
2005 -49%
2006 355%
2007 89%
2008 -18%
2009 320%
2010 -211%
2011 -152%
2012 -59%
2013 165%
2014 -18%
2015 31%
2016 -2%
2017 -50%

4.
4a. Structure and the performance of the banking system.
Banking structure of the Srilanka is consisted of the licensed commercial bank and the
licensed specialized banks (Dang and et.al., 2017). These banks are responsible for the financial
system and strives for the highest share in the total assets of financial system. Banking system of
the srilanka comprises well diversified system that involves the central bank, two state owned
banks, 11 private domestic banks, 13 foreign banks, regional banks, saving bank, 2 housing bank
and 3 licensed banks. Banking system plays a critical role in the financial system of Srilanka as it
is engaged in the provisions relating to the liquidity in the overall economy at the time of
converting risk attributes of the assets. Banks facilitate payment services by providing the ways
for carrying the financial transactions. The performance of the Srilanka banking system is tended
to be sound as it is highly contributing in maintaining the confidence and strengthen the financial
activities in the business.

4b. Regulatory and the supervisory measures in the banking system.
The regulation and supervision of the banking system in Srilanka is in the hands of the
central bank (Cohen, 2018). Legal framework comprises Monetary law and banking act. Central
bank in Srilanka is has the powers for issuing the detailed directives to commercial bank. During
the 1993, Basel Accord has been adopted for the commercial banks. In accordance with the
Central bank, the capital ratios are been maintained at the comfortable level in the year 2017. At
the time of the global financial crisis banking sector of Srilanka has taken several measures that
includes the establishments of the non-banking sector, innovations in the technology, compliance
risk processes, remuneration practices, improvements in the culture of the corporate and the
customers' relationship management for attaining the survival in the crisis time (Godley and
Lavoie, 2016). These measures enabled the system in mitigating the loss and the risk that
occurred due financial crisis.
4c. Presence of the Islamic banking and the financial institution.
Islamic banking in the Srilanka is been carried out mainly in two forms, on one hand it is
called as the fully-fledged Islamic system while on other side it is known as the co-existence
with the Islamic windows or the conventional banks (Kidwell and et.al., 2016). Particularly
eight banking institution in the Srilanka are carrying out the Islamic banking activities that are
based on the full fledged system. From the 8 banks one of the bank has the license for operating
as the commercial bank on the basis of the Islamic principles provisioned of transactions. The
other banks are been treated as the non banking corporations which are carrying out the Islamic
business in banking. Likewise, there are 38 conventional banks from which 4 are actively
participating in the Islamic business through the Islamic windows.
4d. Reasons and the changes that happened in the monetary policy.
The central of the Srilanka has disposed several ranges of the instruments that includes
direct and the indirect in conducting the monetary policy for the price stability. The indirect
measures such as bank rate, open market operations and the variable ratio. Theses measures
become useful to authorities in quick restoring the order in credit market for bringing desired
results. The monetary policy of the Srilanka keeps on changing over the years as the economy of
the Srilanka has shown the growing success in the past and the current years (Ball, 2017).
Decline in the monetary value of the Srilanka results in lower disposable income and prices has

been raised which in turn leads to inflation. Higher rate of interest results in depression in the
income but helps in stabilising the level of the prices. The findings depicts that the monetary
policy of Srilanka tended to be effective and the economy has realised the gloomy environment
even in the times of the global crisis.
4e. Discussion relating to the extent of the successful of the monetary policy.
Srilanka uses its monetary policy as the tool for keeping the inflation at lower rate. For
maintaining the inflation rate, Srilanka had opted for changing the intermediate targets or by
using the varying policy. Central bank had announced for the strict supply of the money at the
time when the country faced high inflation or the rate of inflation in the economy of the Srilanka
had been increased with the greater percentage (Berger and Bouwman, 2017). Thus, this country
has always been considered as the high inflation region as compared to the other countries.
5. Describing the view relating to the use of the monetary policy in solving the banking problems
worldwide.
The use of the monetary policy in the Srilanka has not been counted as suitable in resolving
the banking problems across the globe as it impacted the macro economic factors such as
inflation, volatility in the exchange rate had created higher risk. This affects the employment,
savings and the output in the overall economy.
CONCLUSION
From the above report it can be concluded that money and banking plays a major role in
maintaining the stability in the economy of Srilanka. Adoption of the monetary policy the bank
had lead to enhancement in the performance and is the major grounds for the suucess of the
Srilanka in the overall market worldwide.

REFERENCES
Books and journal
Ball, R. J., 2017. Inflation and the Theory of Money. Routledge.
Berger, A. N. and Bouwman, C. H., 2017. Bank liquidity creation, monetary policy, and
financial crises. Journal of Financial Stability. 30. pp.139-155.
Cohen, B. J., 2018. The geography of money. Cornell University Press.
Dang, T. V., and et.al., 2017. Banks as secret keepers. American Economic Review, 107(4),
pp.1005-29.
Godley, W. and Lavoie, M., 2016. Monetary economics: an integrated approach to credit,
money, income, production and wealth. Springer.
Kidwell, D. S., and et.al., 2016. Financial institutions, markets, and money. John Wiley & Sons.

Year
Nominal
GDP
[replace
this with
currency
units]
Broad
Money
[currency
units]
CPI
[replace
this
with
Base
Year
when
index
=1.0]
GDP
Deflator
[Base
Year
when
index
=1.0]
Real GDP
[state Base
Year and
whether
published
or
calculated]
Deposi
t Rate
of
Interest
Loan
Rate
of
Interest
199
8 850.53 37.11 9.36 9.21416 92.31 0 0
199
9 838.62 38.73 4.69 4.162701 201.46 0 0
200
0 869.5 38.44 6.18 7.27743 119.48 0 0
200
1 832.75 39.02 14.16 13.6648 60.94 10.78 0.51
200
2 867.64 39.35 9.55 8.11157 106.96 9.22 4.68
200
3 982.64 39.39 6.31 8.748664 112.32 6.00 1.47
200
4 1066.59 41.07 7.58 8.801492 121.18 5.07 0.61
200
5 1250 41.68 11.64 10.41873 119.98 5.64 0.31
200
6 1437.7 40.99 10.02 11.27703 127.49 6.80 1.41
200
7 1632.96 39.23 15.84 14.02844 116.40 9.08 2.67
200
8 2041.22 34.52 22.56 16.32702 125.02 10.89 2.2
200
9 2095.44 37.35 3.46 5.879883 356.37 10.61 9.25
201
0 2808.43 32.61 6.22 22.79926 123.18 6.90 -10.25
201
1 3214.01 43.45 6.72 3.831394 838.86 6.43 5.37
201
2 3350.52 42.25 7.54 10.82843 309.42 8.67 2.21
201
3 3610.29 44.71 6.91 6.236913 578.86 10.23 5.85
201
4 3819.25 47.39 3.18 2.912104 1,311.51 7.50 4.79
201
5 3844.51 52.48 3.77 0.649042 5,923.36 5.99 6.27
201 3857.35 56.08 3.96 4.080132 945.40 7.10 6.16

6
201
7 4073.74 7.70 8.264306 492.93 9.00 3.05