Select any combination of variables by clicking on the check-boxes or the variable name. Note: You may choose a maximum of two variables.
Click on the Plot Data to plot the graph.
Toggle the Show Recessions button to highlight recession years.
Toggle the Series Statistics button to display simple descriptive statistics on each selected variable.
Click on the Yield Curve button to display the Yield Curve for a particular quarter. By using your mouse-cursor to drag on the slider button below the years on the horizontal axis of the data plot, you will be able to select any date between 1960:1 and 2004:2.
Click on the Scatter Plot button to toggle on or off a scatter plot of the two chosen series. Please note: you must select two variables to use this feature. The green cross-lines pin-point the current quarter selected by the slider described in 5). A sample correlation measure is displayed in this scatter plot window.
Press Reset to start over.
Questions:
Plot the three-month Treasury bill rate and the rate of inflation together on the graph. What do you observe about the relationship between these two variables over time?
In general, which of the two series tends to be higher? According to the Fisher equation, what does this tell you about the real interest rate?
Looking at the early 1980s, what explains the high interest rates the US Treasury had to pay on its borrowing in that period?
Looking at the 2003-2004 period, what has happened to the real interest rate? In light of this, what do you think is likely to happen to nominal interest rates in 2005?
Plot the three-month T-bill rate and the ex post real rate together on the graph. While the series move together much of the time, there are certain times when the two series diverge. What explains this?
Select the rate of inflation and the three-month T-bill rate (in that order) and click on the scatter plot button. Are most of the observations above or below the 45 degree line? What does this imply for the real interest rate?
