What about the non-traditional channels of monetary policy

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Reference no: EM13865129

A "rate cycle" is a period in monetary policy during the federal funds rate moves from its low point toward its high point, or vice versa, in response to business cycle conditions.?Go to the St. Louis Federal Reserve FRED database, and find data on:?- Federal Funds Rate (FEDFUNDS)

- Real business fixed investment (PNFIC96)?-
- Real residential investment (PRFI96), and?
- - Consumer Durable Expenditures (PCDGCC96)?For the Federal Funds Rate,
- change the frequency setting to "Quarterly". Download all the data into
- a spreadsheet.

Part 1. When did the last rate cycle begin and end?

When was the previous rate cycle? (Note: if a rate cycle is currently in progress, use the current period as the end). Is this rate cycle a contractionary or expansionary rate cycle? Describe and explain economic events behind these cycles. (Limit: 700 words)

Part 2. Calculate the percentage change in business fixed investment, residential (housing) investment, consumer durable expenditures over these two rate cycles. Based on your answer in Part 1 and your calculations, how effective was the traditional interest rate channel of monetary policy over these rate cycles? Fully explain reasons for these differences and if possible use models presented in this course such as the Aggregate Demand and Aggregate Supply model.

Part 3. What do you think about the non-traditional channels of monetary policy? Could you provide an example of a variable or set of variables that could show non-traditional channels of monetary policy? Describe and explain.

Reference no: EM13865129

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