Question: From the same website as that in Exercise 1, download Consumer Price Index (for all items), and the 3-month T-bill interest rate (secondary market rate).

From the same website as that in Exercise 1, download Consumer Price Index (for all items), and the 3-month T-bill interest rate (secondary market rate). Calculate monthly inflation (i.e., growth rate of monthly CPI) and then obtain ex post real interest rate as the difference between the 3-month T-bill rate and the monthly inflation rate. Add the real interest rate to the equation that you estimated in Exercise lb. Interpret the economic and statistical significance of the real interest rate in this new equation.

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Let CPI denote the monthly Consumer Price Index The monthly inflcation rate INFLRATE is Let NOMRATE ... View full answer

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