Sargent, Thomas J. (contributor); Williams, Noah (contributor) - 2006
AMERICAN INFLATION 3
Bullet Bullet β
t
pit−βt
pi∗1 pi∗2
G(βt)
Figure 2. Adaptive dynamics and the “escape event”.
Here flt … specification of the deficit and the reform
event. Instead of calibrating the model as they do, we form a likelihood function … imposing a “reform” event: whenever these conditions are violated, we
simply reset inflation to the low steady state …⁄1(mt …