Question: Plot the Taylor Rule since 1990 on a quarterly basis
Plot the Taylor Rule since 1990 on a quarterly basis (similar to Figure 18.9). For the output gap, use the percent deviations of real GDP (FRED code: GDPC1) from potential output (FRED code: GDPPOT). For inflation, use the percent change from a year ago of the price index for personal consumption expenditures (FRED code: PCEPI). Assume that the long-run risk-free rate averages 2 percent and the target inflation rate is 2 percent. When complete, compare the Taylor Rule rate against the actual federal funds rate (FRED code: FEDFUNDS) after 2007.
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