In this question you look at the relationship between movements in the inflation rate and the interest
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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 = Pt Pt1/ Pt1 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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