Orphanides, Athanasios; Williams, John C. - Federal Reserve Bank of San Francisco - 2007
which the economy undergoes structural change and where private agents and the central bank possess imperfect knowledge …∗t)+epi,t, epi ∼ iid(0,σ2epi), (4)
ut = φuuet+1 +(1−φu)ut−1 +αu (ret −r∗)+eu,t, eu ∼ iid(0,σ2eu), (5)
where pi denotes inflation, u ….036
(0.017)
(˜ret −r∗)+eu,t, ˆσeu = 0.29, DW = 0.84, (7)
The numbers in parentheses are the estimated standard errors of the …