The Economics of Money, Banking, and Financial Markets 10th Edition by Frederic Mishkin

Exercise 24

Figure 1 shows the relationship between estimated real interest rates and nominal interest rates. Go to www.martincapital.com/ and click on "U.S. Financial Data" and then "U.S. Financial Charts," then on "nominal versus real market rates" to find data showing real interest rates and nominal interest rates. When do the nominal and real interest rates give a very different picture about the tightness of monetary policy? How might this have led monetary policymakers to make mistakes if they focused entirely on nominal interest rates?