Evans, George W.; Honkapohja, Seppo - Centre for Dynamic Macroeconomic Analysis, University … - 2008
supply curve.
Here x
t
and π
t
denote the output gap and inflation rate for period t,
respectively. i
t
is the nominal …
below. E
∗
t
x
t+1
and E
∗
t
π
t+1
denote private sector expectations of the output
gap and inflation next period. Since our … Taylor
(1993) rule, i.e.,
i
t
= π
t
+0.5(π
t
− ¯π)+0.5x
t
,
where ¯π is the target level of inflation and the target level of …