Reference no: EM132961752

Research Assignment : Interest Rates

You will use the IMF International Financial Statistics (IFS) database for this assignment. Detailed instructions for using this database are included in the instructions for Research Assignment #2.
• IMF-IFS "Query":
• Select "Time": ‘Timeline', ‘Years', 2010 to 2021
• Select "Country": your selected country, and Canada
» If your country uses the EURO as its currency, see the ‘NOTES' below for which indicator to use
• Select "Indicator": type in "policy-related interest rate"
o Select the only option provided, ‘...Monetary Policy-Related Interest Rate, Percent per Annum'
» If there is no data on this variable, see the ‘NOTES' below for how to find an alternative indicator
• This gives you a table with comparative Central Bank policy interest rates (in nominal terms)
• Click on the tab that says ‘Table', to change this into a ‘Line' graph. Take a screenshot of this graph.
(a) Canada has had historically low interest rates in the past decade. How does the recent history of the
nominal policy interest rate of your selected country compare to Canada's?
(b) How has the nominal policy interest rate of your selected country fluctuated (or has it been relative stable)?
Now change the variables as follows:
• Change "Time" to be from 2017 to 2021
• "Indicator": type in, "consumer price index all"
o select: ‘Prices, Consumer Price Index, All Items, Percentage change, Corresponding period previous year, Percent'
(c) Has the REAL policy interest rate been relatively high or low in recent years in your country? (Remember that the real interest rate is the nominal interest rate minus the inflation rate. On your graph, the real interest rate is the nominal interest rate minus the rate of inflation (which is the CPI variable you have just added to your graph). So, the real interest rate is the distance between the two lines, and can be negative if inflation is above the nominal interest rate.) Many countries (including Canada) have had real interest rates close to zero in recent years.
(You might find it easier to answer this question by looking at the actual data instead of lines on a graph.
Just click on the tab that now says ‘Line', to change it back to a ‘Table', to get a table of the data.)
(d) Would you expect to make a better return if you invested your money in a financial instrument in your selected country or in Canada?
• Is your answer different if you consider the Nominal or Real interest rate?
(e) Why do you think financial investors do not all invest in your selected country instead of investing in Canada?

Attachment:- Research Assignment Instructions 7.rar