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1、QuantitativeTechniquesECOM037CourseworkSchoolofEconomicsandFinanceQueenMaryUniversityofLondonNameStudentNumberEmailAddressInformation:PleasehandleacopytoMrs.SarahRileyandsendanelectronicversiontoDr.DarioMaimoneAnsaldoPatti(d.maimone@qmul.ac.uk)withintheduedate.Pl
2、easenotethatthedeadlineisstrict.AnydelayinsubmittingthecopytoMrs.Rileyand/ortoDr.Maimonewillresultina5%penalizationonyourfinalmark,whichisthe(equallyweighted)averageofthemarksineachexerciseinthepaper.Pleaseanswerallthequestionsinalltheexercisesinthepaper.Students
3、shouldincludeinthecourseworkONLYtherequiredtables/graphsasindicatedinthepaper.Commentsshouldbelimitedtothenumberoflinesindicatedforeachanswer.Students,whoincludedifferentmaterialthantherequiredone,willbepenalized.MONETARYPOLICYANDSTOCKMARKETTwooppositeviewsemerge
4、dintheliteratureregardingthewayinwhichthecentralbanksshouldsetmonetarypolicy.Accordingtothefirst,centralbanksshouldnotreacttomovementsinassetprices,unlessthosemovementsmayhelpinpredictingfuturechangesinotherdeterminants,suchasinflation.Accordingtothesecondstrando
5、fliterature,monetarypolicycouldbebetterrefinedifstockmarketmovementsareincludedintheanalysis.Awell-knowntool,whichisemployedbymonetaryauthoritiestotrackmonetarypolicy,istheso-calledTaylorrule.Theaimofthisexerciseistotestwhetherstockmarketmovementsplayacriticalrol
6、einrefiningmonetarypolicyeitherdirectlyorindirectly.Useforthisexercisethedatasetnamed:"Data_UK_MP.xlsx",whereFTSEisthestockmarketvalue,IRistheinterestratesetbycentralbank,CPIistheconsumerpriceindexandGDPistheUKGDPvolumeusing2005asreferenceyear.1.Afterinspectingth
7、edata,generateanappropriateEviewsworkfile,payingattentiontothefrequencyofthedata.[5marks]2.ThefirststepconsistsofestimatingthestandardTaylorrule(STR):whereisthelogoftheinterestrate,cistheconstant,istheactualannualinflationrate,isthedesiredinflationrate,isthelogof
8、GDPandisthepotentialGDP:a)Usingthedatainyourworkfile,generateallthevariables,whichyouneedtoestimateequation(1)(tokeepthingssimpleyoumayassumethat).Plotthevaria
