Question

In Chapter Data Exploration Problem 2, you plotted the inflation rate together with the gap between the Taylor rule and the federal funds rate. Visually, when the Taylor rule gap was positive, inflation appeared relatively high; when it was negative, inflation appeared relatively low. Download the two indicators and compute the correlation between the gap and inflation
(a) From 1992 to 1999; and
(b) From 2000 to the present. What do the results suggest?



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  • CreatedOctober 02, 2014
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