Question: In this question you look at the relationship between movements in the inflation rate and the interest rate. Calculate the inflation rate as the growth

In this question you look at the relationship between movements in the inflation rate and the interest rate.

Calculate the inflation rate as the growth rate in your CPI or GDP Deflator series using: _t = P_t P_t1/ P_t1 where _t is the inflation rate in year t and P refers to your CPI or GDP Deflator. Note, you will not have an observation for inflation for the first year of your sample.

GDP Deflator:

1970 : 0.0960983926

1971 : 0.106484131

1972 : 0.120297583

1973 : 0.144550898

1974 : 0.181233797

1975 : 0.222567722

1976 : 0.279228029

1977 : 0.360630866

1978 : 0.422298496

1979 : 0.523821697

1980 : 0.668479961

1981 : 0.820665289

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