Economics – Monetary Policy

Economics – Monetary Policy

 

Critically examine the effectiveness of monetary policy responses in the wake of economic and financial stress and how those responses have affected the shape of the yield curve. Refer to recent examples in your answer.

In this task, students are expected to discuss how the RBA or any other central bank uses available tools to mitigate negative impact of the financial stress or weaker economy.
Written Assignment, MAF 202 (T1, 2014)
Title: The Changing Slope of the Yield Curve and Economic Prospects of an Economy

This assignment is designed to understand how the changes in yield curves provide possible explanation for the changes in economic prospect of an economy. The students are required to select two developed economies, one being Australia, to compare the shape of the yield curve and its impact on the future economic prospects.

 

Task1: (5 marks)
Plot and critically examine the shape of the yield curves that represent the structure of interest at 5 successive periods respectively for December 2009, December 2010, December, 2011, December2012 and December, 2013. The explanations should be drawn based on the expectation theory of the interest rates.

Notes:
For this task, students are expected to collect yields for short term and long term Treasury securities (minimum three maturities are required to plot the yield curve) at 5 different points in time respectively for December 2009, December 2010, December 2011, December,2012 and December, 2013. This allows the students to see the different types of yield curve that may be observed across different periods.

 
Task 2 (5 marks)
The yield curve has been a good leading indicator of economic activities. Critically examine how the changes in the slope of the yield curve (long term treasury yield – short term treasury yield) provides possible explanation for changes in economic prospect of an economy.

For this task, students are required to collect data series for a long term Treasury bond rates and short term t-notes (T-bill rate for US) over a period of time from December, 2009 through December 2013, and economic growth over the same at quarterly interval.
Task 3 (5 marks)

Critically examine the effectiveness of monetary policy responses in the wake of economic and financial stress and how those responses have affected the shape of the yield curve. Refer to recent examples in your answer.

In this task, students are expected to discuss how the RBA or any other central bank uses available tools to mitigate negative impact of the financial stress or weaker economy.
Task 4 (2.5 Marks)
Draw some conclusions and policy implications for investors and policy makers (note: this task is to be jointly completed by all the group members).

 
reference List (Harvard System) and citation 0.50 0.60 1.00 1.00
Task 1- Examining the different types of yield curves = 1.00 2.00 3.20 5.00
Task 2: Changes in Slope of YC and Economic Prospects = 1.00 2.00 3.20 5.00
Task 3- Monetary Policies responses in the wake of financial crisis and the shape of the yield curve = 1.00 2.00 3.20 5.00
Task 4- Conclusions and Policy Implications =1.00 1.50 2.00 2.50
Total = 6.00 10.50 15.00 20.00
Draw some conclusions and policy implications for investors and policy makers (note: this task is to be jointly completed by all the group members).
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