Problem 1: Australian Recessions [25 marks]
As discussed in Lecture 2, a recession is sometimes defined as a period of two or more consecutive quarters of negative growth in real GDP. Under this definition, in mid 2020 Australia fell into recession for the first time in nearly 30 years. In this problem, you will analyse whether an alternative definition of recessions depicts a different picture of Australia’s economic performance over the last decades.
1. Using data from ABS (https://www.abs.gov.au/), construct two time series in Excel:
(a) Australia’s Real GDP growth (chain volume measures) at a quarterly frequency.
(b) Australia’s Real GDP per capita growth (chain volume measures) at a quarterly frequency.
Focus on the period between the last quarter of 1973, and the latest observation available. Make reference to the series ID that you used.
2. Suppose we define a recession as a period of two or more consecutive quarters of negative growth in Real GDP. Based on this definition, and using the time series for Real GDP growth constructed in Part 1, do the following:
(a) Using a table, report all recession episodes in your data and the duration of each episode in quarters. How many quarters did recessions last on average?
(b) Make a plot in Excel showing the economic time series (Real GDP growth, in this case), along with “recession bars” indicating the recessions identified in (a).
Hint: Check this website for help on how to create recession bars in Excel.
3. Now assume that we define a recession as a period of two or more consecutive quarters of negative growth in Real GDP per capita. Based on this definition, redo Parts 2.(a)-2.(b), using the time series for Real GDP per capita growth constructed in Part 1.
4. Compare your results from Parts 2 and 3. Highlight any discrepancies between the dating recessions under each definition. Explain the possible reasons behind such differences.

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