Suppose that the Fed instead has a diminishing amount of attention for inflation, but not output. What would that model look like?

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

General Directions

Please follow all general directions regarding equations and formating. My preference is for PDF files generated through RMarkdown to keep track of both your code and your writing. Replication 1 is due at 11:59 PM on September 30th. Please submit both the .rmd and .pdf to the DropBox on BlackBoard. Do not panic if the Drop Box closes and simply email the files to me at rmattson at wtamu dot edu.

 

Equations should be used using the equation context in RMarkdown (use the $ surrounding the proper equation). As an example, a linear regression should look like yt = mxt + bt and not y_t = mx + b_t. For full effect place them centered in a separate line using the $$ context.

 

yt = mxt + b

 

Graphs and tables should be properly spaced and readable. Labels should be easy to read and understandable to some one outside the course. In other words, rename your variable names so that they make sense like “output” or “interest rates” and not “y” or “i”.

 

Fail to comply with formatting rules will lead to petty grade penalties, so please edit and revise so it looks nice. Evidence of collaboration (identical sentences, graphs that are too similar, etc) will result in lower grades and potential academic misconduct charges depending on how similar the work is. Plagiarism is unacceptable in any academic situation and will be met with immediate academic misconduct charges and potentially a failing grade on the assignment and int he class. Your words, your intuition, and your analysis are always preferable to representing some one else’s work as your own.

 

You may use this document as a format for your answers. Just be sure to change the author name before you Knit the file (see Line 3 in the rmd).

 

Have fun. Don’t be afraid to experiment.

 

The Taylor Rule

We put the Taylor Rule into an applied Econometric form

 

it  = β0  + βy˜y˜t−1  + βπ˜π˜t−1  + µt

Suppose we now think that the Federal Reserve has a diminishing amount of attention for inflation and output. What would that model look like?

 

Suppose that the Fed instead has a diminishing amount of attention for inflation, but not output. What would that model look like?

 

Your Equation Here

 

Estimate both models in R, and create a stargazer table demonstrating a comparison of the two similar to the lecture comparison of Hawk and Dove models.

 "Stuff Goes Here" ## [1] "Stuff Goes Here"

Attachments:

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