When did housing prices peak? Just after the great recession, when did housing prices bottom-out? What was the percentage decline from that peak to that trough?

Zohpius

April 12, 2023

Plot the timepath of the Spot Crude Oil Price from January 1994 to January 2022. Just prior to the great recession, when did this price hit its low point? During the Great Recession, when did this price hit its high point and its low point? What was the percentage increase from the pre-recession trough to that peak and the percentage decrease from the recession’s peak to its trough?

Plot the timepath of the Case-Schiller Housing Price Index from January 1994 to January 2022. Just prior to the great recession, when did housing prices peak? Just after the great recession, when did housing prices bottom-out? What was the percentage decline from that peak to that trough?

Plot the timepath of the Delinquency Rate on Single-Family Residential Mortgages from January 1994 to January 2022. Just prior to the great recession, when did this delinquency rate hit its low point? Just after the great recession, when did this delinquency rate hit its high point? What was the percentage point increase from that trough to that peak?

Plot the timepath of corporate bond yields with BAA rating and 10-year treasury security yields from January 1994 to January 2022. The spread between these 2 is considered to be a measure of financial frictions due to increased fears of risk among lenders. When did this spread peak? What was the size of the spread at that peak? What was the average size of the spread from 1995 to 2005?

Plot the timepath of Gross Private Domestic Investment and Private Residential Fixed Investment from January 1994 to January 2022. Just prior to the great recession, when did each investment measure peak? Just after the great recession, when did each investment measure bottom-out? What were the percentage declines from that peak to that trough?

Plot the timepath of the Market Capitalization of the Wilshire 5000 from January 1994 to January 2022. Just prior to the great recession, when did this index hit its low point? During the Great Recession, when did this index hit its high point and its low point? What was the percentage increase from the pre-recession trough to that peak and the percentage decrease from the recession’s peak to its trough?

Plot the timepath of real GDP and real Potential GDP from January 1994 to January 2022. Just prior to the great recession, when did peak? Just after the great recession, when did bottom-out? What was the percentage decline from that peak to that trough?

Plot the timepath of the Unemployment Rate and Total Non-Farm Employment from January 1994 to January 2022. Just prior to the great recession, when did the unemployment rate hit its low point? Just after the great recession, when did the unemployment rate hit its high point? What was the percentage point increase from that trough to that peak? Around the beginning of the great recession, when did non-farm Employment peak? Just after the great recession, when did non-farm employment bottom-out? What was the percentage decline from that peak to that trough?

Draw the IS-MP and AD-AS diagrams for the Great Recession. The IS curve experiences a negative shock due to households reducing consumption because they felt less wealthy with the collapse in housing prices (from question 2) and the spike in oil prices (from question 1). Treat the financial friction (from question 4) as wedge between the risk-free rate for R versus the risk-adjusted rate for R at which firms borrow in financial markets (ie R = Rff + f). Describe the sudden jump in f as a shock to the MP curve so that the 0 lower bound means that Fed cannot adequately respond to the IS shock with a drop in interest rates. Hence, the Fed took the extraordinary measures of quantitative easing (ie buying up a ton of assets other than short-term Treasury securities so that banks felt comfortable enough to lend again).

Plot the timepaths of the Federal Funds Rate and the Financial Assets of the Fed’s Total Assets (less Eliminations from Consolidations) from January 2006 to January 2023. When are the significant turning points (relevant to the Great Recession)? Produce a timeline of all of the dates in this assignment and denote the events (and appropriate magnitudes). Include the passing of the TARP Act, ARRA, and anything else you might think is relevant (eg the fall of Lehman Bros and/or WaMu).