# Discussion: Principle and Monetary Policy Exam

## Discussion: Principle and Monetary Policy Exam

Discussion: Principle and Monetary Policy Exam ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Discussion: Principle and Monetary Policy Exam ECON 4385 Monetary Policy Homework 2 Answers References. Discussion: Principle and Monetary Policy Exam John Taylor, A Historical Analysis of Monetary Policy Rules. Alex Nikolsko-Rzhevskyy and David Papell, Taylor Rules and the Great Inflation. Alex Nikolsko-Rzhevskyy, David Papell, and Ruxandra Prodan, The Taylor Principles. John Taylor, Housing and Monetary Policy. Donald Kohn, John Taylor Rules. Ben Bernanke, Monetary Policy and the Housing Bubble. Janet Yellen, Perspectives on Monetary Policy. Did the Fed follow the Taylor rule during the Great Inflation of the 1970s? No. Federal Funds Rate (FFR) lower than Taylor rule prescribed FFR. (a), (c). (First) Taylor principle violated. Coefficient on inflation not significantly greater than one. (a), (b), (c). Did the Fed follow the Taylor rule during the Volcker Disinflation from 1979 to 1985? No. FFR greater than Taylor rule prescribed FFR. (a), (c). Second Taylor principle violated. Coefficient on output gap not significantly greater than zero. (c). Did the Fed follow the Taylor rule during the Great Moderation from 1985 to 2000? Yes. FFR close to the Taylor rule prescribed FFR. (a), (c). (First) Taylor principle holds. Coefficient on inflation significantly greater than one. (a), (c). Second Taylor principle holds. Coefficient on output gap significantly greater than zero. (a), (c). Did the Fed follow the Taylor rule prior to the Financial Crisis from 2002 to 2006? No. FFR lower than Taylor rule prescribed FFR. (d). Difference smaller with core than with headline inflation. (e), (f). Did the Fed follow the Taylor rule following the Great Recession from 2009 to 2015? No and yes. FFR lower than Taylor rule prescribed FFR with a coefficient on the output gap of 0.5. (g). FFR close to Taylor rule prescribed FFR with a coefficient on the output gap of 1.0. (g). The Taylor Principle is that, when inflation p rises, the federal funds rate is raised more than point-for-point so that the real interest rate rises. The second Taylor principle is that, when the output gap y rises, the federal funds rate is increased. Using the data on the next page from the Taylor Rules and the Great Inflation paper discussed in class, show whether or not the first and second Taylor principles are satisfied for the three estimates based on (1) the values of the coefficients and (2) the values and statistical significance of the coefficients. The (first) Taylor principle is that the coefficient on inflation a > 1.0. The second Taylor principle is that the coefficient on the output gap g > 0. Significance. t-statistic = coefficient / standard error for significantly different from zero. t-statistic = (coefficient 1.0) / standard error for significantly different from one. Significant at 5 percent level if the t-statistic > 1.96. Four Quarter Average Inflation Rate 0.95 < 1.0. No for value and statistical significance. 0.70 > 0 and 0.70 / 0.08 > 1.96. Yes for value and statistical significance. One-Quarter-Ahead Inflation Forecast 1.32 > 1.0 but 0.32 / 0.17 < 1.96. Yes for value, no for statistical significance. 0.66 > 0 and 0.66 / 0.13 > 1.96. Yes for value and statistical significance. Two-Quarter-Ahead Inflation Forecast 1.61 > 1.0 and 0.61 / 0.23 > 1.96. Yes for value and statistical significance. 0.68 > 0 and 0.68 / 0.14 > 1.96. Yes for value and statistical significance. Discussion: Principle and Monetary Policy Exam Get a 10 % discount on an order above $ 100 Use the following coupon code : NURSING10

## Discussion: Principle and Monetary Policy Exam

Discussion: Principle and Monetary Policy Exam ORDER NOW FOR CUSTOMIZED AND ORIGINAL ESSAY PAPERS ON Discussion: Principle and Monetary Policy Exam ECON 4385 Monetary Policy Homework 2 Answers References. Discussion: Principle and Monetary Policy Exam John Taylor, A Historical Analysis of Monetary Policy Rules. Alex Nikolsko-Rzhevskyy and David Papell, Taylor Rules and the Great Inflation. Alex Nikolsko-Rzhevskyy, David Papell, and Ruxandra Prodan, The Taylor Principles. John Taylor, Housing and Monetary Policy. Donald Kohn, John Taylor Rules. Ben Bernanke, Monetary Policy and the Housing Bubble. Janet Yellen, Perspectives on Monetary Policy. Did the Fed follow the Taylor rule during the Great Inflation of the 1970s? No. Federal Funds Rate (FFR) lower than Taylor rule prescribed FFR. (a), (c). (First) Taylor principle violated. Coefficient on inflation not significantly greater than one. (a), (b), (c). Did the Fed follow the Taylor rule during the Volcker Disinflation from 1979 to 1985? No. FFR greater than Taylor rule prescribed FFR. (a), (c). Second Taylor principle violated. Coefficient on output gap not significantly greater than zero. (c). Did the Fed follow the Taylor rule during the Great Moderation from 1985 to 2000? Yes. FFR close to the Taylor rule prescribed FFR. (a), (c). (First) Taylor principle holds. Coefficient on inflation significantly greater than one. (a), (c). Second Taylor principle holds. Coefficient on output gap significantly greater than zero. (a), (c). Did the Fed follow the Taylor rule prior to the Financial Crisis from 2002 to 2006? No. FFR lower than Taylor rule prescribed FFR. (d). Difference smaller with core than with headline inflation. (e), (f). Did the Fed follow the Taylor rule following the Great Recession from 2009 to 2015? No and yes. FFR lower than Taylor rule prescribed FFR with a coefficient on the output gap of 0.5. (g). FFR close to Taylor rule prescribed FFR with a coefficient on the output gap of 1.0. (g). The Taylor Principle is that, when inflation p rises, the federal funds rate is raised more than point-for-point so that the real interest rate rises. The second Taylor principle is that, when the output gap y rises, the federal funds rate is increased. Using the data on the next page from the Taylor Rules and the Great Inflation paper discussed in class, show whether or not the first and second Taylor principles are satisfied for the three estimates based on (1) the values of the coefficients and (2) the values and statistical significance of the coefficients. The (first) Taylor principle is that the coefficient on inflation a > 1.0. The second Taylor principle is that the coefficient on the output gap g > 0. Significance. t-statistic = coefficient / standard error for significantly different from zero. t-statistic = (coefficient 1.0) / standard error for significantly different from one. Significant at 5 percent level if the t-statistic > 1.96. Four Quarter Average Inflation Rate 0.95 < 1.0. No for value and statistical significance. 0.70 > 0 and 0.70 / 0.08 > 1.96. Yes for value and statistical significance. One-Quarter-Ahead Inflation Forecast 1.32 > 1.0 but 0.32 / 0.17 < 1.96. Yes for value, no for statistical significance. 0.66 > 0 and 0.66 / 0.13 > 1.96. Yes for value and statistical significance. Two-Quarter-Ahead Inflation Forecast 1.61 > 1.0 and 0.61 / 0.23 > 1.96. Yes for value and statistical significance. 0.68 > 0 and 0.68 / 0.14 > 1.96. Yes for value and statistical significance. Discussion: Principle and Monetary Policy Exam Get a 10 % discount on an order above $ 100 Use the following coupon code : NURSING10

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