Purpose.
Due October 5, 2020
Introduce you to Excel graphing
Create time series plots of inflation and interest rate.
Create cross-section plots of inflation and interest rate.
Describe and discuss patterns in the evolution of inflation and interest rate.
Pedagogical Rationale.This assignment requires that you first look for data and plot them into a graph. To do this, you should visithttps://fred.stlouisfed.org/and register if you want an account. Retrieving data does not require you to register. There are some benefits with registering though. Next, you will plot two graphs, a scatter plot and a time series graph. Next, you will customize the units of the series by applying a growth formula on one of the series. Next, you will plot the growth rate (inflation rate) graph. Lastly, you will describe and discuss patterns in the evolution of the data series. These tasks will develop your proficiency in searching for, transforming, and interpreting data.
Personal consumption expenditures (implicit price deflator) (DPCERD3Q086SBEA)
To learn how to plot Excel graphs visit : https://support.microsoft.com/en-us/office/present-your-data-in-a- scatter-chart-or-a-line-chart-4570a80f-599a-4d6b-a155-104a9018b86e
Grading.Your grade will be determined by (a) how precisely you complete the search and transformation data tasks and (b) how accurately you interpret the data.
Steps to Search for and Transform the Data.
Visit https://fred.stlouisfed.org/
In the search field, enter Effective Federal Funds Rate (EFFR)
Click on tab Effective Federal Funds Rate (EFFR)
You will see a page with Effective Federal Funds Rate. On the row with “Edit graph” You
will see two boxes, enter the dates September 1, 2000 and September 1, 2020.
Click the edit graph tab. In the “Modify Frequency” box, choose “Quarterly.”
Click the “x” on the top right to exit that page.
On the FFR page click the download tab.
Choose your format. The “Excel” is for Excel file.
Choose the save file option. Note where you are saving your file.
Repeat steps 2 for Personal consumption expenditures (implicit price deflator) (PCE)
You will see a page with Personal consumption expenditures (implicit price deflator). On
the row with “Edit graph” You will see two boxes, enter the dates September 1, 2000 and
September 1, 2020.
The data is quarterly, but you need to change in to rates; “inflation (PCE).”
Click the edit graph tab. In the “Units” box, choose “Percentage change from year ago.”
Click the “x” on the top right to exit that page.
Click the download tab
Choose your format. The “Excel” is for Excel file.
Choose the save file option. Note where you are saving your file.
Writing Prompts.Answer the following questions:
Plot a time series graph of FFR and Inflation (PCE).
Plot a scatter diagram of FFR and Inflation (PCE).
Present the two graphs as separate graphs on a word document.
Make sure you label the axis correctly. Also Provide meaningful titles for the graphs.
In the classical (long-run) theory covered in Chapter 5, changes in money growth or
inflation do not affect the real interest rate. Real interest rate is determined in the loanable funds market. This is why there’s a one-for-one relationship between changes in the inflation rate and changes in the nominal interest rate. What equations produce the latter result? I need two equations since there are two versions of this result.
5.For the sample period examined, give what are the relationship between inflation and interest rate? In both times series and scatter plots. That is describe and discuss patterns in the evolution of inflation and interest rate.