User Account

All Pages

Compare the implied federal funds rate

Assignment Help Macroeconomics
Reference no: EM13859675

1) In this question we are going back in time and compare  the implied federal funds rate from the original Taylor rule vs the Mankiw rule.  The time period we are investigating is the third quarter of 2008.  For the quarterly data on GDP and potential GDP, the date notation for the third quarter of 2008 is '2008-07-01.' Use the following links to calculate the GDP gap during this time.

Data on real GDP

https://research.stlouisfed.org/fred2/series/GDPC1

Data on (real) potential GDP

https://research.stlouisfed.org/fred2/series/GDPPOT

To calculate the 'inflation gap in the Taylor rule, you need to use the link below and take the percent change in the PCE overall index from the third quarter of 2007 (2007-07-01) to the third quarter of 2008 (2008-07-01).  We assume, as Taylor did, that the target rate of inflation = 2%.

Quarterly data on the PCE price index

https://research.stlouisfed.org/fred2/series/PCECTPI

a) Using the data links above, calculate the federal funds rate implied by the original Taylor rule. We assume that the equilibrium (natural) real rate of interest is 2%, just like Taylor did, and we use the same coefficients as Taylor did. (please show all work).

b) Using the link below for the federal funds target, compare your answer in part a) to what the actual target was as of September 30, 2008 (note the data on the FF target are daily so use the data from 2008-09-30). Was the Fed acting hawkish or dovish relative to the federal funds rate implied by the Taylor rule? Explain.

Daily data use for the target of the federal funds rate

https://research.stlouisfed.org/fred2/series/DFEDTAR

We now move on to the Mankiw rule. To calculate the funds rate implied by the Mankiw rule, we need different data: the PCE CORE rate of inflation and the unemployment rate at the same time period. 

Quarterly data on the PCE CORE price index

https://research.stlouisfed.org/fred2/series/JCXFE

Unemployment rate (the data are monthly so use data for September 2008 as in 2008-09-01).

https://research.stlouisfed.org/fred2/series/UNRATE

c) Using the links above, calculate federal funds rate implied by the Mankiw rule. Again, please show all work.

d) Now compare the funds rate implied by the Mankiw rule to the target for the federal funds rate..... was the Fed acting dovish or hawkish?  Explain.

e) Now compare the two rates implied by each rule and explain why one of the rules does a MUCH better job at explaining Fed behavior (tuning in the Fed) than the other rule.

Reference no: EM13859675

Questions Cloud

Explain some of the legal nuances of a corporation : Watch the short video on basic corporate structure and business entities. The video helps explain some of the legal nuances of a corporation and compares the corporation to other types of business entities discussed in the text
Calculate and plot fab and fc for distances x : Apply equilibrium conditions and express FC and FAB as functions of x (the distance shown on the figure). Note: FCis the overall force in pin C which isobtained by first finding CX and CY.
What is a excellent guide about cell cycle : What is a excellent guide about Cell Cycle and Cell Communication?
The hydrogen nuclei in the body are found mainly : The hydrogen nuclei in the body are found mainly in fat and water. The T2 value of fat was measured to be 200 ms and that of water to be 700 ms. In a spin-echo experiment, calculate the delay between the 90o pulse and the 180o that maximizes the diff..
Compare the implied federal funds rate : 1) In this question we are going back in time and compare  the implied federal funds rate from the original Taylor rule vs the Mankiw rule.  The time period we are investigating is the third quarter of 2008.  For the quarterly data on GDP and pote..
What is the one greatest strength of a pluralistic society : What is the one greatest strength and the one greatest weakness of a pluralistic society? Do these characteristics work for or against business?
What is the correct stoichiometry for the complex formed : 1. What is the correct stoichiometry for the complex formed when FGF-2 ginds and activates the FGF cell-surface receptor (FGFR)? a. 1 molecule FGF-2: 1 FGFR
Equilibrium price before the tax : 1. Using Figure 1 below, determine each of the following: a. equilibrium price before the tax
Describe the details of the incident and consequences : Describe the details of the incident and consequences. Outline the root cause or causes of the incident. What could have been done to prevent the incident?

Reviews

Write a Review

Macroeconomics Questions & Answers

  To derieve the cost of keeping maintenance

Say your parents give you a car for your birthday. It is not the new model you wanted, but it's in very good condition.The cost of keeping the car to you is.

  Should eddie recommend that purchase of the robot

Eddie is a production engineer for a major supplier of component parts for cars. He has determined that a robot can be installed on the production line to replace one employee. The employee earns $20 per and benefits worth $8 per hour for a total ..

  How do we know that calculating gdp by the expenditure

How do we know that calculating GDP by the expenditure approach yields the same answer as claculating GDP by income approach

  What impact do pricing strategies have on welfare

Use concepts that you have learned throughout the semester, such as consumer and producer surplus, scarcity, and how companies decide where to price products and how much to produce, and how we as consumers decide at what price we will purchase a ..

  Suppose the following are national accounting data for a

suppose the following are national accounting data for a given year for malaysia hypothetical

  Assume the new leadership in congress decides to repeal

Assume the new leadership in Congress decides to repeal some of the tax breaks granted to large businesses during the past several years.

  Determine the value of the marginal propensity to consume

In national income accounting, grain fed to a hog at a commercial hog farm is considered a(n) a. final good b. intermediate good c. consumer good d. capital consumption allowance

  Compute the gdp, ndp , ni, pi

There is a list of figures for a given year in billions of dollars. Using this data, compute the  NDP , NI, PI, DI or net exports.

  How much juice will the costumer purchase in a month

how much juice will the costumer purchase in a perticular month. What is the elasticity of demand for juice.

  Relationship between average costi and prices

Briefly explain in words the sequence of changes that occur as the two economies move from no trade to free trade.

  What governs the behavior of nominal exchange rates

1. Explain why the real exchange rate never changes under the theory of purchasing power parity? 2. What governs the behavior of nominal exchange rates under PPP?

  Discuss the following statement from the standpoints

Discuss the following statement from the standpoints of equality and efficiency: "When workers are laid off, they should be able to collect unemployment benefits until they find a new job."

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd