2004-01-01 1.00 1.9 1.7 13606.6 13748.2 5.7 2007-01-01 5.26 2.3 2.4 14728.1 14768.3 4.5 We are using data from 2004-01-01 to answer parts a), b), and c). a) (5 points) Using the original Taylor Rule where the equilibrium real rate of interest is estimated to be 2% and the target inflation rate is 2%, what is the federal funds rate implied by the Taylor Rule? b) (5 points) Using the Mankiw Rule, what is the federal funds rate implied by the Mankiw Rule? c) (5 points) According to the Taylor Rule, was the Fed being hawkish or dovish during this period? Explain and be specific with numbers. d) (5 points) Let's fast forward 3 years to 2007-01-01. Using the original Taylor Rule where the equilibrium real rate of interest is estimated to be 2% and the target inflation rate is 2%, what is the federal funds rate implied by the Taylor Rule? e) (5 points) According to the Taylor Rule, was the Fed being hawkish or dovish during this period? Explain and be specific with numbers. FF - the federal funds rate PCE INF = PCE inflation PCE CORE = the core rate of PCE inflation GDP = real GDP GDP POT = potential (real) GDP UR = the unemployment rate Please don't copy and paste the answer from a question that was already answered.
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5*(Inflation - Target Inflation) + 0.5*(Output Gap). The equilibrium real rate is given as 2%, the target inflation rate is 2%, and the inflation rate from the data for 2004 is 1.9%. The output gap is the difference between real GDP and potential GDP, which from Show more…
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