Orphanides, Athanasios (contributor); … - 2003
time t information, y is the output gap, ` 2 (0;1), fi > 0, and e is a serially uncorrelated
innovation. As discussed by …
necessary for the model to yield a nontrivial inflation-output gap variability tradeoff.5
We assume that the policymaker can set … policy during period t so as to determine the
intended level of the output gap for period t+1, xt, subject to a control error …