08 Jun Question Assignment 2 Question 2, and so on). Each of th
Question
Assignment 2
Question 2, and so on). Each of these plots is worth 1 mark.
1. This question will utilize data from the Bank of Canada (bankofcanada.ca).
(a) Download daily observations on target for the overnight rate from January 2, 2008 to December 31, 2008.
(b) Download daily observations on the overnight money market financing rate from January 2, 2008 to
December 31, 2008.
(c) Plot the data you obtained in parts (a) and (b) on top of one another.
2. This question will utilize data from the FRED database (fred.stlouisfed.org).
(a) Download annual observations on Canadian GDP from 2006 to 2015. (HINT: Use the series labelled “Gross
Domestic Product by Expenditure in Constant Prices: Total Gross Domestic Product for Canada”.)
(b) The following table provides estimates on the output gap (as a fraction of potential GDP) from the OECD.
2006
0.02293 2007
0.01912 2008
0.00672 2009
-0.03982 2010
-0.02836 2011
-0.01744 2012
-0.01995 2013
-0.01701 2014
-0.01038 2015
-0.01602 Use this data, along with the data you obtained in part (a), to calculate potential GDP for the years
from 2000 2006 to 2015. (HINT: The numbers in the table above are calculated using the equation at the
bottom of p. 352 in the textbook; solve this equation for Y ? .)
(c) Plot the data you obtained in parts (a) and (b) above in a single figure.
(d) Download annual observations on the Canadian unemployment rate from 2006 to 2015. (HINT: Use the
series labelled “Unemployment Rate: Aged 15 and Over: All Persons for Canada”.)
(e) Use the data provided in part (b), along with the data you obtained in part (d) and Okun’s law, to calculate
the natural rate of unemployment. (HINT: Make sure to keep in mind that the data you obtained in part
(d) is expressed in percentage terms, e.g., in 2006, the unemployment rate was 6.3%, so that u = 0.063 in
Equation (12.1) in the textbook.)
(f) Plot the data you obtained in parts (d) and (e) above in a single figure.
3. This question will utilize data from the FRED database (fred.stlouisfed.org) along with some data you obtained
in the first assignment.
(a) Download annual observations on M1 for Canada from 1991 to 2016.
(b) Use the data you obtained in part (a) to calculate the annual growth rate of M1 for Canada from 1992 to
2016.
(c) Use the data you obtained in part (a) of Question 3 on the first assignment to calculate the (annual)
inflation rate for Canada from 1992 to 2016. (HINT: You can disregard the data you previously obtained
for years up to 1990.)
(d) Plot the data you obtained in parts (b) and (c) above in a single figure.
4. This question will utilize data from Questions 2 – 3 above.
(a) Use the data provided in part (b) of Question 2 above (potential GDP), along with the data you obtained
in part (c) of Question 3 above (the inflation rate), to calculate the interest rate prescribed by the Taylor
rule for the years 2006 to 2015. (HINT: Use Equation (15.2) in the textbook, making sure that ? is
expressed in percentage terms, e.g., in 2006, ? = 1.73.) 1 (b) The following table shows the Bank of Canada’s target for the overnight rate on the final day of the year
for 2006 to 2015:
2006
4.25 2007
4.25 2008
1.50 2009
0.25 2010
1.00 2011
1.00 2012
1.00 2013
1.00 2014
1.00 2015
0.50 Plot this data and the data you obtained in part (a) above in a single figure.
5. This question will utilize data from Question 3 above.
(a) Plot the data you obtained in part (c) of Question 3 above (the inflation rate) for the years 1996 to 2015.
On the same figure, include dashed lines at 1% and 3% (these are the low and high endpoints of the Bank
of Canada’s inflation-control target range; the Bank of Canada aims to keep inflation at the 2% midpoint
of this target range). 2
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