For this project, you will need to acquire all of the data from FRED at the Federal Reserve bank of St.Louis. (https://fred.stlouisfed.org/
The data you will need for this report are (with the FRED identifier):
Real GDP (GDPC1)
Potential real GDP (GDPPOT)
CPI Inflation (CPAUCSL)
Federal fundsrate (FEDFUNDS)
Convert all data to quarterly observations. The time period is 1960 through 2001.
For this project, you will use this version of the Taylor Rule:
FFR* = Inf +2.0 +0.5 (y – yp) +0.5 (Inf – Inf*)
where FFR* is the “target” Federal funds rate to be generated by the Taylor Rule y is the quarterly
growth rate of real GDP.yP is the quarterly growth rate of potential real GDP. Infis the quarterly CPI rate
of inflation, and INF* is the desired or target rate of inflation. For this assignment, set INF* to 2.0. I am
assuming that 2.0% is the equilibrium real federal funds rate. Using the above equation calculate FFR*
with the FRED data for the period 1960 through 2001.
Your assignment has two parts:
A. Determine when monetary policy has been according to the Taylor rule too expansionary or too
contractionary. To do this, calculate and plot the difference between the actual Federal funds rate (FFR)
and that generated by the Taylor Rule (FFR*); that is, FFR-FFR* Defineperiods of “expansionary”
policy as those when actual FFR is less than FFR*. Conversely, periods of contractionary” policy are
when actual FFR is greater than FFR* Neutral policy is when (FFR-FFR*) is fluctuating around zero.
Using the plotted data locate the most likely dates when monetary policy turned from generally
expansionary to generally contractionary. Draw a vertical line at these dates. In selecting these breaks,
look for general trends in the data: do not get lost in every time when FFR-FFR* turns positive or
negative. Provide a brief statement justifying your choices.
B. In a separate figure, plot the difference series (FFR-FFR*) along with the inflation rate. Use this
plot to make the case for your choices in pat A. In making your case, you may use any additional
statistical information to support your answer. Provide a brief statement justifying your choice.
Your report must not exceed two typed pages of text, using standard fonts and margins. Any tables,
charts, figures, etc. should be appended to the text. Your assignment is worth 100 points: 50 points for
correctly measuring part A and 50 points for part B.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Achiever Papers is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Dissertation Writing Service Works
First, you will need to complete an order form. It's not difficult but, if anything is unclear, you may always chat with us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download