Fluent Essays

The first final project for this course is the creation of an informative presentation. The presentation will analyze U.S. interest rate behavior over a 10- to 15-year period during the last 50 years. Through your research, you will examine economic trends and risks, and the impact of monetary policy on interest rates. This presentation will provide an opportunity for you to develop an understanding of interest rate behavior. By analyzing a sufficient period of time, you will identify trends and changes in interest rates and witness the impact that key economic events have on interest rate determination. In doing this, you will develop an appreciation of the relationship between policy targets and market factors, which impact economic activity. The final product will be submitted in Module Three. eco_306_final_project_1_guidelines_and_rubric.pdf _1.docx plotting_and_comparing_fred_data__1___1_.docx Unformatted Attachment Preview ECO 306 Final Project I Guidelines and Rubric Overview The first final project for this course is the creation of an informative presentation. The presentation will analyze U.S. interest rate behavior over a 10- to 15-year period during the last 50 years. Through your research, you will examine economic trends and risks, and the impact of monetary policy on interest rates. This presentation will provide an opportunity for you to develop an understanding of interest rate behavior. By analyzing a sufficient period of time, you will identify trends and changes in interest rates and witness the impact that key economic events have on interest rate determination. In doing this, you will develop an appreciation of the relationship between policy targets and market factors, which impact economic activity. The final product will be submitted in Module Three. In this assignment, you will demonstrate your mastery of the following course outcomes:   Explain the determinants and behavior of interest rates as they relate to markets Analyze the relationship between monetary policy and the economy for informing responsible business decision making Prompt For this final project, create a PowerPoint presentation of 8–10 slides analyzing U.S. interest rate behavior over a 10- to 15-year period during the last 50 years. You will access information in the Federal Reserve Economic Database (FRED) and create a presentation that includes speaker notes and visual representations of your findings. Specifically, the following critical elements must be addressed: I. Overview: Define the specific interest rates and time period that you are analyzing, and explain why you chose them. II. Interest Rates A. Explain interest rate trends over the time period and whether they have been high or low by historical standards. B. Using FRED tools, visually illustrate changes in interest rates during the time period. C. Describe economic risk factors that have impacted interest rates in the time period and what kind of impact they had. Consider bankruptcies, financial crises, geopolitical factors, and so on. D. Describe underlying economic conditions that impacted the activity of these interest rates during the time period. III. Monetary Policy A. Discuss the impact of interest rate changes on general business decision-making. Consider expanding or contracting operations, deciding to undertake or postpone additions of capital (i.e., increasing productive capabilities), or increasing or decreasing inventories. B. Explain the causal relationship between the federal funds rate and market rates of interest. C. Using your analysis of interest rates during the time period as a guide, explain the internal and external impacts on the economy. Deliverable Final Submission: Presentation Submit your presentation in Module Three. It should be a complete, polished artifact containing all of the critical elements of the final product. It should reflect the incorporation of knowledge and feedback gained up to this point in the course. This submission will be graded with the Final Project I Rubric. Final Project I Rubric Guidelines for Submission: Your presentation should be 8–10 slides with speaker notes, visual representations of your findings, and citations adhering to the latest edition of APA formatting. Critical Elements Overview Exemplary (100\%) Meets “Proficient” criteria and explanation demonstrates exceptional balancing of brevity and detail Proficient (85\%) Defines the specific interest rates and time period being analyzed, including an explanation of why they were chosen Interest Rates: Trends Meets “Proficient” criteria and explanation demonstrates a complex grasp of how interest rate trends compare to historical standards Explains interest rate trends over the time period and whether they are high or low by historical standards Interest Rates: Changes Meets “Proficient” criteria and illustration demonstrates a masterful use of FRED tools to show changes in interest rates Visually illustrates changes in interest rates during the time period using FRED tools Needs Improvement (55\%) Defines the specific interest rates and time period being analyzed, including an explanation of why they were chosen, but definition is cursory or explanation is incomplete Explains interest rate trends over the time period and whether they are high or low by historical standards, but explanation is illogical or contains inaccuracies Visually illustrates changes in interest rates during the time period using FRED tools, but illustration is unclear or incomplete Not Evident (0\%) Does not define the specific interest rates and time period being analyzed Value 4 Does not explain interest rate trends over the time period 11 Does not visually illustrate changes in interest rates during the time period using FRED tools 11 Interest Rates: Risk Factors Meets “Proficient” criteria and description demonstrates a sophisticated awareness of how economic risk factors impacted interest rates Describes economic risk factors that have impacted interest rates in the time period and what kind of impact they had Interest Rates: Economic Conditions Meets “Proficient” criteria and description demonstrates a complex grasp of underlying economic conditions that impacted interest rates Describes underlying economic conditions that impacted the activity of these interest rates during the time period Monetary Policy: Business DecisionMaking Meets “Proficient” criteria and discussion demonstrates a sophisticated awareness of the relationship between interest rate changes and general business decision-making Meets “Proficient” criteria and explanation demonstrates a complex grasp of how the federal funds rate and the market rates of interest influence each other Meets “Proficient” criteria and explanation demonstrates a sophisticated awareness of how the interest rates impacted the economy Discusses the impact of interest rate changes on general business decisionmaking Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-toread format Submission has no major errors related to citations, grammar, spelling, syntax, or organization Monetary Policy: Causal Relationship Monetary Policy: Impacts Articulation of Response Explains the causal relationship between the federal funds rate and market rates of interest Explains the internal and external impacts on the economy, using the analysis of interest rates during the time period as a guide Describes economic risk factors that have impacted interest rates in the time period and what kind of impact they had, but description is incomplete or impacts are unrelated Describes underlying economic conditions that impacted the activity of these interest rates during the time period, but description contains inaccuracies or is illogical Discusses the impact of interest rate changes on general business decisionmaking, but discussion is unclear or unrelated to the impact Explains the causal relationship between the federal funds rate and market rates of interest, but explanation is cursory or has gaps in logic Does not describe economic risk factors that have impacted interest rates in the time period 11 Does not describe underlying economic conditions that impacted the activity of these interest rates during the time period 11 Does not discuss the impact of interest rate changes on general business decisionmaking 16 Does not explain the causal relationship between the federal funds rate and market rates of interest 16 Explains the internal and external impacts on the economy, using the analysis of interest rates during the time period as a guide, but explanation is incomplete or does not relate to interest rate analysis Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Does not explain the internal and external impacts on the economy, using the analysis of interest rates during the time period as a guide 16 Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 4 Total 100\% In your discussion post, select a 10- to 15-year time period (of your choosing) over the last 50 years. Then explain how the trends and changes of the federal funds rate and/or the discount rate have impacted short-term or long-term interest rates. Note: The time period you select in this discussion will be used in Final Project I. In response to your peers, examine the difference between your chosen time period and two other periods chosen by peers. To complete this assignment, review the Discussion Rubric document. At the beginning of 2006 the federal fund rate was at 4.5\% rising to 5.25\% by the end of first half of 2006. This rate of 5.25\% was unchanged for a year as this was raised to cool down the rising house bubble during that period. Cooling came in a way that as federal rates increased the banks increased their rates reducing the demand for borrowing by the public. During this period the demand for house property in the US was on peak and this increase in fed rates created a short term interest rate hike trying to avoid further borrowing for the house buying. Federal fund rates were cut by 50 bps to 4.75\% in the month of sept 2007 followed by 50bps fall every month or in a quarter reducing the feral rates to lowest ever by end of 2008 to 0.25\%. This comes as the economic enter into subprime crisis and as the federal funds lower its rate, it would increase demand for money at lower bank rates increasing money supply, liquidity and inflation to the market reviving the economy back. The federal fund rate then was increased to 0.5\% in Dec 2015 and to 0.75\% in Dec 2016 as the growth rate stabilized. This created a long term interest rate impact as the economy was pulled out of major recession of the century. Janet Yellen is the fed chairperson from Feb 2014 to Jan 2018. The last fed rate hike was in the month of June in the current year to 1.25\%. Thus federal fund rate places and important position in determining the short and long term interest rate impacts in terms of monetary policy. Federal fund rates have an indirect impact on interest rates as the fed increases rate the money supply in the economy decreases and vice versa. This can be done to increase/decrease inflation or revive economy from recession by lower fund rates. Reference https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135. Running head: PLOTTING AND COMPARING FRED DATA Plotting and Comparing FRED Data Brendon Cronin ECO-306 Money & Banking 1/18/19 1 PLOTTING AND COMPARING FRED DATA Plotting and Comparing FRED Data Interest Rate Graphs First Graph 1 Second Graph 2 PLOTTING AND COMPARING FRED DATA Third Graph 3 PLOTTING AND COMPARING FRED DATA 4 Analysis Comparison The rates of prime bank loan and EFFR are included in the two interest rates that significantly have changed with the passage of time, particularly in the selected 10 year period from 2006 – 2016. The above graphs are showing the data for the selected time period. When it comes to EFFR, it can be seen that there is a reduction in the interest rate within the selected time period. i.e., 2006 – 2016. It reduced from almost 4.29 percent to almost 0.54 percent when the year 2016 ended. In January 2009, a major drop was seen by EFFR when it dropped to 0.15 percent in January 2009 from almost 5.25 percent in mid of 2006. The aim of the decrease in EFFR was to recover the economy (Baily, 2014). Throughout the year 2008 – 2009 period, the economy of the USA was facing a negative economic and monetary condition that resulted in the reduction as the Federal Reserve Bank policy for promoting the economic programs and activities. The year 2007 reported the highest effective rate for federal funds when the interest rate 5.26 percent. However, in the next year, the rate reduced to below 1 percent. Though, since the drop below 1 percent in 2008, the rate is increasing slowly, enabling the economy for rebuilding at a greater pace, along with not having issues with a bubble another time. In the middle of the PLOTTING AND COMPARING FRED DATA 5 year 2006 and 2008, the EFFR faced an uneven trend with severe falls and increases. The EFFR from 2009 to 2016 did not increase by over 0.5 percent until after the year 2015. The loan rate was reduced in the year 2008 and the year 2009. The rate after this remained constant from the year 2009 to the year 2016. In July of 2006, the rate of bank prime loans was 8.25 percent that was at its peak. At the beginning of 2006, there was a 7.26 percent rate of bank prime loan that dropped in 2009 to 2015 to 3.25 percent (Baily, 2014). It indicates that there was a reduction in the rate of bank primate loans for over 5 percent throughout the selected period of 10 years. Therefore, the trends for the rate of bank prime loan indicates that there has been a reduction in throughout the 10-year period. This reduction is basically seen as positive. It is for the reason that higher rates of loan make it indefensible for clients to attain credit in the marketplaces. Causal Relationship It can be seen by assessing the two graphs that the EFFR has a positive and direct relation. There was a 4.29 percent effective rate of federal funds interest in January 2009. This rate has seen an increment to 5.26 percent. On the other hand, there was a rise in the rate of bank prime loans to 9.5 percent from 8.5 percent showing a positive relationship between the two. (Fred, 2016). In 2008 and 2009, the reaction of both of the interest rates was the same and both of the rates of interest saw the lowest of all the time. In 2009, the EFFR saw a decline to 0.25 percent; while, in the same period, there was a reduction in the rate of bank prime loan to 3.2 percent (Wu, Xia, 2016). Both interest the rate of bank prime loan and EFFR remained the same after 2009. It indicates a positive casual relation in the middle of two interest rates. The above charts are also showing the same curve patterns for both of the interest rates. References PLOTTING AND COMPARING FRED DATA Baily, M. N. (Ed.). (2014). Across the great divide: New perspectives on the financial crisis. Hoover Institution Press. Wu, J. C., & Xia, F. D. (2016). Measuring the macroeconomic impact of monetary policy at the zero lower bound. Journal of Money, Credit and Banking, 48(2-3), 253-291. Fred (2020). FRB Rates - discount, fed funds, primary credit. Fred. Retrieved from https://fred.stlouisfed.org/categories/118?t=interest&ob=pv&od=desc. FRED. (2020). Effective Federal Funds Rate. Retrieved from https://fred.stlouisfed.org/series/FEDFUNDS#0. FRED (2020). Bank Prime Loan Rate. Retrieved from https://fred.stlouisfed.org/series/MPRIME. FRED (2020). 30-Year Conventional Mortgage Rate (DISCONTINUED). Retrieved from https://fred.stlouisfed.org/series/MORTG. 6 ... Purchase answer to see full attachment