|Before running any experiments, it will be useful simply to examine
some of the
macroeconomic data to see what they look like. Graphs are a good way of
"feel" for the data. Since 1970 there are five periods that
can be classified
as general recessionary periods: 1974:1-1975:4, 1980:2-1983:1,
1990:3-1991:1, 2001.1-2001.3, and 2008:1-2009:2.
Similarly, two subperiods can be classified as general inflationary
and 1978:2-1981:1. These subperiods are useful for reference purposes.
this chapter you are asked to table and graph the variables listed in
Section 2.6 for the
period since 1970:1 and examine how they behave during the recessionary
subperiods. You should save these tables and graphs for future reference.
You may also
want to table and graph the variables for the entire period since 1952:1.
If you do so,
how many other recessionary and inflationary subperiods can you pick out?
In doing the work in this chapter (and the others) you should always
use Table A.2 in Appendix A
as the reference for the variable names. The
definition of a variable
is not always repeated when the notation for the variable is used in
Experiment 3.1: Variables for the 1970:1-2011:2 Period
- Table and graph the variables listed in Section 2.6 for the
Some of the following questions may require more knowledge of
than you currently have. Do your best for now to get a feel for the data,
and then come
back to the tables and graphs to review the data from time to time as you
- From the table and graph for real GDP, GDPR, can you pick out the
four recessionary periods mentioned above? Which of the other variables
tend to follow the
business cycle, and which do not? Can you think of reasons why some
do and some don't?
Focus in particular on the components of GDPR and on the saving rate,
- From the table and graph for the percentage change in the GDP
can you pick out the two inflationary periods? How does the import
price index, PIM,
behave during these periods? How about the nominal wage rate, WA, and
the real wage rate,
- How much overlap is there between the recessionary and inflationary
(These overlap periods are called periods of
"stagflation.") Can you speculate
on what might have caused the stagflation? Can you pick out any
variables that you have
graphed as possible culprits?
Labor Market Variables
- How did the unemployment rate, UR, behave during the recessionary
- Is there a tight relationship between UR and the rate of inflation,
- How did productivity, PROD, behave during the recessionary periods?
PROD be procyclical?
- Calculate the values of the labor force participation rates
L1/POP1, L2/POP2, and
L3/POP3 for a few of the quarters within the overall period. Note how
they have changed
over time, and note the remarkable rise in L2/POP2, the participation
rate for women
25-54, since 1970. What might have caused this rise?
- Are the labor force participation rates procyclical or
neither? Do they seem to vary with UR? Why might they vary with UR?
Fiscal Policy Variables and Other Federal Government
- Examine how the fiscal policy variables COG, D1G, D2G, D3G, D4G,
D5G, and TRGHQ
have changed over time.
- Examine how the government deficit SGP and the government debt -AG
over time. What are some of the factors that led to the large rise in
- Why are interest payments of the government, INTG, growing so
consequences does this have for SGP and AG?
Monetary Policy Variables and Other Financial Variables
- How did the bill rate, RS, behave during the recessionary periods?
inflationary periods? What does this say about Fed behavior?
- What is the relationship between the long term bond rate, RB, and
RS? Why might
RS fluctuate more than RB?
- Examine carefully the behavior of RS during the period
1979:4-1982:3. Does this
behavior seem different than at other times? How did the money
supply, M1, behave during
this period versus at other times? Does it seem to you that the Fed
during this period than otherwise?
- Compute velocity, GDP/M1, for a few quarters and examine how it has
time. How stable over time does it seem?
- What happened to GDPR and GDPD in 1974? What was the monetary
response to this in
1975? (Look at RS and M1.)
- What was the monetary response following the stock market crash in
1987? Can you
pick out the effects of the stock market crash on household wealth,
Foreign Sector Variables
- Examine how PIM, IM, PEX, and EX have changed over time.
- How has the saving of the foreign sector, SR, changed over time?
What are the
main factors that have led to this change? (-SR is roughly the U.S.
- SGP and -SG are sometimes call the "twin deficits."
relationship over time. Can you think of reasons why the two deficits
might be positively
- If you have tabled or graphed the variables from 1952:1 on, answer
questions above for this longer period. For example, how many
recessions can you pick out
since 1952? How many high inflation periods? Are some of the
relationships that were not
stable after 1970 closer to being stable before 1970?