13. Consider the following figure. The charts present the evolution over time of the federal funds rate, US GDP, GDP Deflator and (M2) after a negative monetary shock. Describe the links between these variables, how they relate to economic theory and their implication for monetary policy.

13. Consider the following figure. The charts present the evolution over time of the federal funds rate, US GDP, GDP Deflator and (M2) after a negative monetary shock. Describe the links between these variables, how they relate to economic theory and their implication for monetary policy.

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter14: Modern Macroeconomics And Monetary Policy

Section: Chapter Questions

Problem 15CQ

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Question

0.8
0.6-
0.4-
0.2
-0.0
-0.2
-0.4
-0.6
0.2
0.1
-0.0
-0.1
-0.2
-0.3 -
-0.4
-0.5
-0.6
0
0
Estimated Dynamic Response to a Monetary Policy Shock
Source: Christiano, Eichenbaum, and Evans (1999)
3
6
Federal Funds Rate
6
9
GDP Deflator
12
12
15
15
0.2
0.1
-0.0
-0.1-
-0.2
-0.3
-0.4
-0.5
-0.6
0.2
-0.0
-0.2
-0.4
-0.6
-0.8
-1.0
0
0
3
6
GDP
M2
9
12
12
15
15

13. Consider the following figure. The charts present the evolution over time of the
federal funds rate, US GDP, GDP Deflator and (M2) after a negative monetary shock.
Describe the links between these variables, how they relate to economic theory and
their implication for monetary policy.
Please keep your answer short and to the point. Unnecessarily long answers that
include irrelevant information will be penalised.

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