Fall Semester $2020/2021$

Capital Markets Expectations $(12$ points$)$

i$.$ Based on targets for inflation and overall economic growth rate and on actual observations of inflation and economic growth rates, apply the Taylor rule to estimate what short$-$term interest rate level should be an appropriate target for monetary authorities.

$\backslash$table$[[$Economic Measures,GDP Trend$/$Inflation Target,Forecast$],[$Year$-$over$-$year increase in GDP$,3\mathrm{.}20\%,2\mathrm{.}60\%$