Question 1

Financial stability is a goal of most central banks. To see this, plot the European Central Bank's assets (FRED code: ECBASSETS) as a present of nominal GDP (FRED code: EUNNGDP) (Note: to match units, divide the ratio by 4). Based on this cart how important was the goal of financial stability for the ECB (a)before 2007, (b) during the crisis period of 2007-2009, (c) when the euro-area crisis intensified in 2011-2012, and (d) in the period following 2013 as the euro-area crisis subsided?

Question 2

In 2012, the Federal Reserve announced an inflation objective of 2% "over the longer run" for the price index of personal consumption expenditures (FRED code: PCERI). However, many analysts focus on the "core" price index (FRED code: PCEPILFE), which omits the volatile food and energy components. For the Fed's horizon, does this difference matter? Plot the percent change from a year ago of both price measures since 2000. Download the data and compute the averages and standard deviations over that period. What do you conclude?