ECO 306 FRED Data

 

 

Overview:

 

In this assignment, you will examine the path of two interest rate series and identify any trends, changes, or correlations between the two economic data series. Using the same range of years you selected for your discussion in Module Two (i.e., a 10- to 15-year span over the last 50 years), you will plot and compare the federal funds rate with either the prime bank loan rate or the 30-year conventional mortgage rate using the Federal Reserve Economic Database (FRED).

 

To understand the relationship between the federal funds rate and the prime bank loan rate or the 30-year conventional mortgage rate, read the following analogy to a car’s brakes:

 

Suppose you bring your car to an auto repair shop because it does not stop in a safe manner when the brakes are applied. The mechanic explains that the car’s rotors are rusted out and the brake pads are gone, and that is why the car is not stopping as needed. In this analogy, the rotors and brake pads are the federal funds rate, and the braking performance of the car is the prime bank loan rate or the 30-year conventional mortgage rate.

 

Prompt:

 

First, graph the monthly effective federal funds rates over your selected 10- to 15-year span. Follow the steps below to graph the data:

 

 

1. Visit the FRB Rates - discount, fed funds, primary credit webpage within FRED.

 

2. Under the “Effective Federal Funds Rate” heading, check the box next to “monthly.”

 

 

3. Click on the “Add to Graph” button.

 

 

 

4. Once on the screen with the graph, adjust the dates in the two boxes in the upper right-hand corner found to the left of the red “Edit Graph” button (see image below). Select the same time period (i.e., 10- to 15-year span over the last 50 years) you chose for your discussion in Module Two. Selecting just the 10- to 15-year period you are examining is very important! If you do not restrict the time period, your graph will have far too much data and will show data points outside of the period you are examining.

 

 

5. After you have adjusted the year span, click on the blue “Download” button in the upper right-hand side of the screen and choose “Image (graph).”

 

 

6. Next, graph either the monthly prime bank loan rates or monthly 30-year conventional mortgage rate, again of your selected 10- to 15-year span, using the same instructions above.

 

A. For prime bank loan rates, check the box next to “monthly” under the “Bank Prime Loan Rate” heading and follow steps 3–5 above.

 

B. For 30-year conventional mortgage rate, check the box next to “monthly” under the “30-Year Conventional Mortgage Rate” heading and follow steps 3–5 above.

 

7. After downloading the two graphs as images, insert them into a Word document along with a brief written analysis (described in the critical elements below).

 

 

Specifically, the following critical elementsmust be addressed:

 

 

I. Interest Rate Graphs

 

 

 

A. Graph 1:Graph, download, and insert an image of the graph of the effective federal funds rates from the Federal Reserve Economic Database (FRED) using the same time period (i.e., 10- to 15-year span over the last 50 years) you chose for the Module Two discussion response into a Word document.

 

B. Graph 2:Graph, download, and insert an image of the graph of the prime bank loan rates or the 30-year conventional mortgage rate from FRED using the same time period (i.e., 10- to 15-year span over the last 50 years) you chose for the Module Two discussion response into a Word document.

 

 

II. Analysis

 

A. Comparison:Analyze the two interest rates and explain how they have changed over your chosen time period, citing specific examples.

 

B. Causal Relationship:Briefly hypothesize the causal relationship between the two interest rates based on knowledge gained in the course. Cite your sources.

 

 

Rubric

Guidelines for Submission:Your paper must be submitted as a 2- to 3-page Microsoft Word document with two inserted graphs, double spacing, 12-point Times New Roman font, one-inch margins, and at least three sources cited in APA format