Project 2: Money and Banking
Summer 2019
- On the website of FRED data base (https://fred.stlouisfed.org/categories), find the data for the
interbank rates for Australia (IR3TIB01AUM156N) and Interest rates on Certificates of Deposit for
Japan (IR3TCD01JPM156N) from January 1990 to the latest month available (monthly frequency).
a. Plot these two interest rates on a line graph. Explain your observation and make an implication
for the movement of the exchange rate between Australian dollar and Japanese yen.
b. Find the data on the exchange rate of Japanese yens per U.S. dollar (EXJPUS) and U.S. dollars per
Australian dollar (EXUSAL) from the same period; then, calculate and graph the cross exchange
rate of Japanese yens per Australian dollar. Is it fully or partly consistent with your answer to
part a? Why and why not?
c. Look for the economic news on both Japanese and Australian economies and any anticipated
changes in the interest rates by their central banks. Do you think the Australian dollar will
appreciate or depreciate against the yen next month? Explain why. - On the website of FRED data base, download the following series on a quarterly frequency from
January 2017 until the latest quarter available.
ï· Personal consumption expenditure price index (PCECTPI): Adjust the units setting to
âPercentage Change From Year Agoâ to obtain the inflation rate.
ï· Real GDP (GDPC1)
ï· Real potential GDP (GDPPOT)
ï· Unemployment rate (UNRATE)
a. Fill the following table for the most recent four quarters of data available. Assume that 2% is the
targeted inflation rate.
Quarter PCE
Inflation
Real GDP Real Potential GDP Inflation Gap GDP Gap
2019:Q1
2018:Q4
2018:Q3
2018:Q2
Average
Note:
Inflation Gap = PCE inflation â 2%
GDP Gap = (Real GDP â Real Potential GDP) *100/Real Potential GDP
b. Fill the same table but for the previous four quarters of data available. Assume the same
targeted inflation rate of 2%.
Quarter PCE Inflation Real GDP Real Potential GDP Inflation Gap GDP Gap
2018:Q1
2017:Q4
2017:Q3
2017:Q2
Average
c. Using the unemployment data, calculate the average unemployment gap for the same two
periods above using the natural rate of unemployment at 4.8%. Based on your answers to parts
a through c, does the divine coincidence apply to the current economic situation (most recent 4
quarters) and the past year (the previous 4 quarters)? Why or why not?
d. What do you think the sources of shocks to the economy in the two periods? Explain the
reasoning.
Sample Solution
determine irrationality of a suicide if there was no way possible of the individual knowing; it can only be judged if there was no attempt to get it from reliable sources (Battin 137-138). I think that Battin is inferring that not having the correct information could mean they are unable to participate in rational thought process. Another assumption of suicide not being rational due to this criterion is caused by internal factors, such as depression where they can unknowingly suppress certain information (Brandt, cited in Battin 1995, 138). She counters this by stating that you can still have adequate information because the future may be already negative, even with a smaller view (Battin 138-139). Therefore, from her counterargument, she is countering any claims of narrow views that the opposition would try to argue by stating that an individualâs health status does not matter. Battin states that some would claim that suicide would be irrational if one committed it because of an unlikely future, but states t >
determine irrationality of a suicide if there was no way possible of the individual knowing; it can only be judged if there was no attempt to get it from reliable sources (Battin 137-138). I think that Battin is inferring that not having the correct information could mean they are unable to participate in rational thought process. Another assumption of suicide not being rational due to this criterion is caused by internal factors, such as depression where they can unknowingly suppress certain information (Brandt, cited in Battin 1995, 138). She counters this by stating that you can still have adequate information because the future may be already negative, even with a smaller view (Battin 138-139). Therefore, from her counterargument, she is countering any claims of narrow views that the opposition would try to argue by stating that an individualâs health status does not matter. Battin states that some would claim that suicide would be irrational if one committed it because of an unlikely future, but states t >
