Question
If you know how to use Excel, go to http://fred.stlouisfed.org, click on Category under Prices select Consumer Price Indexes (CPI and PCE) and download annual
If you know how to use Excel, go to http://fred.stlouisfed.org, click on "Category" under "Prices select "Consumer Price Indexes (CPI and PCE)" and download annual data (if annual data is not available, use the average, use the average command in Excel to get average annual data) for the period 1960-2010 for potential RGDP, actual RGDP, annual inflation rate, and the Fed funds rate. Setting up the appropriate formula in Excel, calculate the output gap and the interest rate implied by the Taylor rule. Could you make a graph that includes both the actual short-term interest rate (Fed funds rate) and the value implied by the Taylor rule. Is there a period for which Taylor rule seems to fit the data particularly well?
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