Inflation is expected to rise when the Taylor Rule persistently
Inflation is expected to rise when the Taylor Rule persistently and significantly exceeds the federal funds rate. Conversely, inflation is expected to decline when the federal funds rate exceeds the rule. Using the same indicators as in Data Exploration Problem 1, plot since 1965 on a quarterly basis the gap between the Taylor rule and the federal funds rate, together with the inflation rate. Over long periods of time, does inflation rise when the Taylor Rule exceeds the federal funds rate? Does it fall when the federal funds rate exceeds the Taylor Rule?

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help