FF PCE INFPCE COREGDP GDP POTUR

2005-04-01 2.94 2.6 2.1 14177.21 4165.8 5.1

2007-01-01 5.26 2.3 2.4 14728.11 4768.3 4.5

We are using data from 2004-01-01 to answer parts a), b), and c).

a) (5 points) Using the original Taylor Rule where the equilibrium real rate of interest is estimated to be 2% and the target inflation rate is 2%, what is the federal funds rate implied by the Taylor Rule?

b) (5 points) Using the Mankiw Rule, what is the federal funds rate implied by the Mankiw Rule?

c) (5 points) According to the Taylor Rule, was the Fed being hawkish or dovish during this period? Explain and be specific with numbers.

d) (5 points) Let's fast forward 3 years to 2007-01-01.Using the original Taylor Rule where the equilibrium real rate of interest is estimated to be 2% and the target inflation rate is 2%, what is the federal funds rate implied by the Taylor Rule?

e) (5 points) According to the Taylor Rule, was the Fed being hawkish or dovish during this period? Explain and be specific with numbers.