You will also want to download the data for Real Gross Private Investment (GPDIC1).
In a well-written essay, explain what happened to the risk premium during the financial crisis in 2008 and how that affected private investment and if there were similarities in 2020 in the pandemic recession. Make sure to answer the following questions in your essay.
Which of these interest rates does the Federal Reserve target directly and how did they respond to the financial crisis?
ECN327: Intermediate Macroeconomics, Summer 2021
Which bond yields increased the most?
What happened to the yield of the 10-yield Treasury bonds and why?
If the BBB risk premium is defined as the difference between the BBB bond yields and the Treasury bond and the AAA risk premium is the difference between the AAA bond yields and the Treasury bonds, which increased more?
How was real private investment affected in the financial crisis?
Finally, were there any similarities in 2020 to the 2008 financial crisis? If so, what?
Notes:
The essay should be approximately 3-4 (double-spaced) pages, including graphs.
You are not required to do any additional research outside of class materials, but if you do, make sure to cite the work of others correctly (ask me if you have questions).
o You should have the models from chapter 5 and 6 in your head as you write the essay, but you dont need to use the models directly.
Make sure to include (at least two) properly labeled graphs.
o You can use the FRED graphs or create your own in Excel or Google Sheets by downloading the data.
The tone of the paper should be as if you are explaining the macroeconomic models and data to an intelligent but not economically-trained audience.
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