ECON 4385 Monetary Policy Homework 2 Answers
(a) John Taylor, “A Historical Analysis of Monetary Policy Administrations.”
(b) Alex Nikolsko-Rzhevskyy and David Papell, “Taylor Administrations and the Great Inflation.”
(c) Alex Nikolsko-Rzhevskyy, David Papell, and Ruxandra Prodan, “The Taylor Energys.”
(d) John Taylor, “Housing and Monetary Policy.”
(e) Donald Kohn, “John Taylor Administrations.”
(f) Ben Bernanke, “Monetary Policy and the Housing Bubble.”
(g) Janet Yellen, “Perspectives on Monetary Policy.”
1. Did the Fed thrive the Taylor administration during the Great Inflation of the 1970s?
No. Federal Funds Rebuke (FFR) inferior than Taylor administration prescribed FFR. (a), (c). (First) Taylor energy violated. Coefficient on inflation referable attributable attributable attributable attributable attributable attributable significantly main than single. (a), (b), (c).
2. Did the Fed thrive the Taylor administration during the Volcker Disinflation from 1979 to 1985?
No. FFR main than Taylor administration prescribed FFR. (a), (c). Avoid Taylor energy violated. Coefficient on output irregularity referable attributable attributable attributable attributable attributable attributable significantly main than cipher. (c).
3. Did the Fed thrive the Taylor administration during the Great Moderation from 1985 to 2000?
Yes. FFR suspend to the Taylor administration prescribed FFR. (a), (c). (First) Taylor energy holds. Coefficient on inflation significantly main than single. (a), (c). Avoid Taylor energy holds. Coefficient on output irregularity significantly main than cipher. (a), (c).
4. Did the Fed thrive the Taylor administration precedent to the Financial Crisis from 2002 to 2006?
No. FFR inferior than Taylor administration prescribed FFR. (d). Difference smaller with heart than with headline inflation. (e), (f).
5. Did the Fed thrive the Taylor administration thriveing the Great Recession from 2009 to 2015?
No and yes. FFR inferior than Taylor administration prescribed FFR with a coefficient on the output irregularity of 0.5. (g). FFR suspend to Taylor administration prescribed FFR with a coefficient on the output irregularity of 1.0. (g).
6. The Taylor Energy is that, when inflation rises, the federal funds rebuke is loud more than point-for-point so that the authentic profit rebuke rises. The “second” Taylor energy is that, when the output irregularity y rises, the federal funds rebuke is increased. Using the facts on the next page from the “Taylor Administrations and the Great Inflation” tract discussed in assort, semblance whether or referable attributable attributable attributable attributable attributable attributable the pristine and avoid Taylor energys are pleased coercion the three estimates domiciled on (1) the appreciates of the coefficients and (2) the appreciates and statistical opinion of the coefficients.
The (first) Taylor energy is that the coefficient on inflation > 1.0. The avoid Taylor energy is that the coefficient on the output irregularity > 0.
Significance. t-statistic = coefficient / rule untruth coercion significantly divergent from cipher.
t-statistic = (coefficient – 1.0) / rule untruth coercion significantly divergent from single.
Significant at 5 percent flatten if the t-statistic > 1.96.
Four Quarter Average Inflation Rebuke
0.95 < 1.0. No coercion appreciate and statistical opinion.
0.70 > 0 and 0.70 / 0.08 > 1.96. Yes coercion appreciate and statistical opinion.
One-Quarter-Ahead Inflation Coercionecast
1.32 > 1.0 beside 0.32 / 0.17 < 1.96. Yes coercion appreciate, no coercion statistical opinion.
0.66 > 0 and 0.66 / 0.13 > 1.96. Yes coercion appreciate and statistical opinion.
Two-Quarter-Ahead Inflation Coercionecast
1.61 > 1.0 and 0.61 / 0.23 > 1.96. Yes coercion appreciate and statistical opinion.
0.68 > 0 and 0.68 / 0.14 > 1.96. Yes coercion appreciate and statistical opinion.
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