How was ffr set right before covid recession

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Reference no: EM133750120

Problem

Suppose we now look at the labor market and the last jobs report in early April (for March 2024) showed U was at 3.8%, which is about what most would expect as a measure of full employment (U*) in the U.S., around the 3.5% to 4.5% range in most estimates. Would your calculations in 1. above change if you use the labor market data. Explain your answer. Some economists argue, however, that following the rule mechanically is not the best policy since it may lead to undesirable outcomes. There are also other factors to be considered. Figure 14.11 in the textbook (Figure 14.11: Taylor Rule and Actual Federal Funds Rate, 1960-2022) shows the FFR plotted against the rate implied by the Taylor rule since 1960. How was FFR set right before COVID-19 recession of early 2020? What do the years from 2010 to 2018 suggest regarding the use of the Taylor rule by the U.S. FED? Explain.

Reference no: EM133750120

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